Friday , November 22 2019
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The allure of steel

Summary:
There’s something about steel. Before I joined Steel Business Briefing in 2008, I’d never really known what I wanted to do career-wise. I worked for some good companies, including competitors of Platts (which acquired SBB in 2011), but never really envisaged staying in the price reporting sector. Nothing against it, I was just young and finding my way, armed with humanities degrees that didn’t gear me up for much outside of education. But there’s something about steel. My colleagues Joe Innace and Henry Cooke have more than half a century covering it. Anyone who knows anything about attrition rates in the publishing/price-reporting agency sector knows that is a tremendously long time. That’s part of the reason it’s such a good place to be: the knowledge you can acquire by spending time with these guys, titans in our field, if you like. This longevity is an extension of what happens in the industry itself. I’ve had the fortune of reporting on the UK steel market for some time now. I’ve moved on a little, but I can’t let go totally. People don’t leave it; they can’t. They retire and take consultancy roles. Or sell their businesses and still attend all the events to meet their old customers, competitors, drinking buddies. Through sickness and health, they remain.

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There’s something about steel. Before I joined Steel Business Briefing in 2008, I’d never really known what I wanted to do career-wise. I worked for some good companies, including competitors of Platts (which acquired SBB in 2011), but never really envisaged staying in the price reporting sector. Nothing against it, I was just young and finding my way, armed with humanities degrees that didn’t gear me up for much outside of education.

But there’s something about steel.

My colleagues Joe Innace and Henry Cooke have more than half a century covering it. Anyone who knows anything about attrition rates in the publishing/price-reporting agency sector knows that is a tremendously long time. That’s part of the reason it’s such a good place to be: the knowledge you can acquire by spending time with these guys, titans in our field, if you like.

This longevity is an extension of what happens in the industry itself. I’ve had the fortune of reporting on the UK steel market for some time now. I’ve moved on a little, but I can’t let go totally. People don’t leave it; they can’t. They retire and take consultancy roles. Or sell their businesses and still attend all the events to meet their old customers, competitors, drinking buddies. Through sickness and health, they remain.

Senior figures in Platts metals content group have come from the industry itself, selling sheet into the oversupplied UK market. You could say they’ve stepped away, but they didn’t leave completely. Because there is something about steel.

It’s a tightly knit fraternity. You write an article that angers one stockholder, everybody knows about it. Everybody knows everybody. The wrath is cumulative, and it can be tough to recover from. I’ve been there (several times).

Just recently I visited a plant in the UK. These visits are so informative. Spending time talking with a former HR executive at British Steel was illuminating, discussing negotiations with unions, decisions on which plants to close/keep. This rich tapestry of background really helps arrange the conceptual furniture, if you will.

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Wherever I’ve been – the UK, Europe or elsewhere – people are happy to spend time educating us and telling us about their businesses. People are proud of the industry. In the UK, it’s a shadow of its former self, a blip on the global radar production-wise, but the know-how of the people involved is staggering. And these ladies and gents do a proper job, maintaining rolling lines and furnaces in searing heat in heavy, hot safety clobber.

It’s an ever changing world and the industry is grappling with some massive issues – namely, the fiery breath of the Chinese dragon reaching markets the world over as the modern-day price setter looks to export surplus supply. When I joined SBB in 2008, European hot rolled prices were around Eur750-Eur755/metric ton, both on a domestic ex-works and CIF Antwerp basis. Today, the CIF Antwerp price is below Eur350/mt CIF, while domestic material transacts at a touch above Eur380/mt ex-works. Spot iron ore prices were around $160/dry mt towards the end of August 2008. Today it’s nearer $50/dmt, after reaching a nadir of about $44/dmt earlier this year – prices touched a high of $193/mt CFR in February 2011.

The dramatic transformation in iron ore has been something to behold. From annual pricing to quarterly to monthly and spot, it’s been a rapid change in the way the commodity trades. Ore derivatives are now touching about half the volume of seaborne trade. A far cry from oil at the moment, but it’s grown exponentially since 2009 when Credit Suisse and Deutsche Bank were trying to make the market.

The massive shift in iron ore pricing sent ripples through steel. In Europe, mills were up in arms about taking prices set by the world’s largest consumer, which has its own vagaries. “Sprecklehausen” became part of my dictionary – the surcharge used to pass-off fluctuations in raw material prices. Floating-prices became part of the industry, not just the old fixed pricing model. We hear of steel buyers such as OEMs hedging their exposure through iron ore swaps. This is akin to an airline hedging jetfuel buys with crude ore derivatives.

It has been, and continues to be, a real pleasure being part of the market – or at least on its periphery. There’s just something about steel, isn’t there?

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