|Item $/unit||Factor||Unit||Unit cost||Fixed||Variable||Total|
|Depreciation & other||20||20||20|
|Pipe cost $/t||38||666||704|
Seamless Tube and Pipe Cost Modelling Notes and Assumptions
The Steel Costing Model
The cost model shown above illustrates how steel tubemaking costs can be estimated through a simple cost benchmarking approach. The predicted cost shown is not meant to represent an actual cost for any real steel mill. It is a notional figure only - albeit one that is built on fairly representative current input cost and resource usage information.
Key input costs are January 2011 world average costs, with ferrous scrap at ~$350/tonne and billet at ~$500/t. SG&A denotes sales, general and administration cost. MHPT denotes man hours per tonne (a measure of labour force productivity). Site visitors are asked to note the high consumables charge shown above - this is mainly accounted for by the very high wear of rolls and guides, usage of which can be very high indeed in a seamless tube mill.
The Steel Product
The product for which the costs are shown is a metric tonne of carbon steel hot rolled seamless tube ['green pipe'] ~100mm in diameter and sawn to length; but in need of further finishing (meaning straightening, threading, testing and even stretch-reduction if the final size is to be below 70mm). The mill type assumed is a CPE-type mill (cross-roll, pierce, elongate) of medium scale (i.e. 100-200 kt/year pipe capacity).
The Business Environment
Readers are advised that the pipe cost estimates shown should be adjusted to reflect the particular business environment in which the steel mill operates. Thus, electricity charges may be higher during the winter. Depreciation costs may be significantly lower, depending on the mill supplier. Yield performance may also be better than the 8.5% figure shown. The tremendous variety of mill types for seamless tubemaking further indicates that care should be taken in extrapolating from the costs above. Actual pipe mill conversion costs will also be very dependent on final tube diameter as well as on any finishing steps that may be required by the product specification.
For further cost modelling support with seamless tubes, please contact MCI's steel economists.