Steel industry profitability and plant loading.

Steel industry EBITDA versus capacity utilisation

One of the key drivers of steel industry profits is plant loading. Steel plants typically make good profits when capacity utilisation is high, and lose money when plant loading is low.

Source: 'Evaluating the Financial Health of the Steel Industry', OECD, Directorate for Science, Technology & Innovation - Steel Committee, Ref DSTI/SU/SC(2015)12/FINAL, published 09-Jun-17. See Fig 18, page 25.

This 12 year time series prepared by the OECD illustrates the historic relationship between steel sector EBITDA and capacity utilisation. It is not surprising that the correlation between these parameters is so good, in a high fixed cost industry where break-even volumes are perhaps at ~60% or more of full capacity.