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The above chart shows the movement in steel scrap prices. As you can see, prices have corrected by more than 25% this year. Steel scrap prices fell by ~20% in 2014. Lower scrap prices should bring down the unit production costs for steel companies that use EAFs to produce steel.

Generally, steel scrap prices follow the trend of iron ore prices. Iron ore prices fell by more than half last year. However, steel scrap prices held steady. With the fall in steel scrap prices, unit production costs for steel companies using EAFs should come down. Nucor, Steel Dynamics, and AK Steel would benefit from lower scrap prices.

Unit steel production costs have come down by ~$150 per ton for steelmakers that use blast furnaces. Most of the steel in China is produced using blast furnaces. Chinese steel companies benefit from lower iron ore prices.

Investors should watch the indicators of steel consumption. We’ll look at that in detail in our next part.

steel scap 

BUY over-rolled/secondary steel coils: HR,CR,GA,GI,EG,PPGI...

CurrencyCash BuyingTransfer BuyingSelling
AUD 16,789.64 16,890.9917,075.56
EUR 26,644.87 26,725.0526,963.10
GBP 29,648.43 29,857.4330,123.38
JPY 200.83 202.86207.14
USD 23,015.00 23,015.0023,085.00
Source: Vietcombank

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