Steel Cost Modelling Notes
The Steel Costing Model
The economic model shown above is prepared only to shown how liquid steel cost can be calculated through a simple cost benchmarking type approach. The predicted total costing shown is not meant to represent an actual cost for any real steel company. It is a notional figure only - albeit one that is built on fairly representative current input costing information.
Key input costs are taken from the other pages shown on the steelonthenet.com website or estimated by our economists. Recent iron ore and coal prices can be found on our steelmaking costs page. Analysis above was prepared in January 2016.
The Steel Product
The steel product for which the cost is shown above is a metric tonne of BOF liquid steel. The cost is for a notional producer - a typical size integrated BOF plant, 3m t/yr, at a Japanese coastal site with its own coke and sinter plant, using imported ore and coal purchased at international prices with third party transport. The blast furnace is assumed to have PCI. The steel plant is assumed to make commodity grade carbon steel for flat products with average labour productivity. To prepare cost benchmarks for different locations or for specific producers please contact us (see below). Steel costs for the electric furnace steelmaking process route (EAF steelmaking) may be found on our EAF steelmaking costs page.
The Business Environment
Site visitors are advised that all estimates shown should be adjusted to reflect the particular business environment in which the steel plant operates. Thus, electricity charges may be substantially cheaper than usual because the melt shop is run primarily at night (to benefit from cheaper night time tarrifs). Depreciation costs may be higher or lower depending on the age of the electric furnace and transformer. Labour productivity may also be substantially poorer than shown (especially in State owned plants prior to privatisation) etc.
Actual costing estimates can also differ because of local accounting policies and practices. The figures above for example assume straight line depreciation over a 20 year asset lifetime. The estimates also assume that 25% of labour cost are fixed - whilst in practice, all costs will be variable over the longer term. The model above endeavours to present the economic data on the basis of standard management accounting practices - users of the model should however be clear that the model is likely to require adaptation for different accounting circumstances.
To estimate the impact of a change in any main input (iron ore, coal, coke, other steel raw materials, energy, or labour) on the total, fixed or variable production costs of any steel product (semi-finished; or flat, long, or pipe and tube finished steel products) made through either main production process route (integrated steel manufacturing or electric arc steelmaking), please contact our steelmaking economists for assistance.