Production Volume
Production volume is the total volume of crude steel produced in a given period.
Guide to Steel Industry KPIs
This guide highlights the key performance indicators for the Steel industry and where investors should look to find an investment edge. While this guide is not a fully integrated steel industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key performance indicators in the steel industry. This guide will aid market participants in identifying industry trends and the future performance of steel companies, by region, and by service type.
Industry Overview
The steel industry includes companies involved in the production of steel, which is an alloy made up of iron, carbon, and small portions of other elements. The steel industry plays a crucial role in the overall economic development of a country and is key to many other industries such as construction, transportation, and manufacturing, among others.
Steelmaking is the process of producing steel from iron ore or steel scraps. The diagram below depicts the steel manufacturing process.
The first step in the process of steel manufacturing is mining. Next comes the production of coke, a pure form of carbon, by converting metallurgical coal into coke. Coke is used as a raw material in a blast furnace to deoxidize iron ore. Then is a process called sintering, where iron ore is mixed with coke and heated to produce a sinter (an iron-rich clinker). This reduces waste and creates an efficient raw material to make molten iron.
Once the raw material has been extracted and converted, we move into the steel manufacturing phase. There are two primary methods of crude steel production:
- Integrated Steelmaking: Based on blast furnace (BF) and basic oxygen furnace (BOF), this method accounts for 70% of global steel production.
- Mini Mill Steelmaking: Based on an electric arc furnace (EAF), this method accounts for 30% of global steel production.
Integrated Steelmaking (BF/BOF)
Integrated steelmaking is the process of manufacturing steel from scratch, using the full cycle of steel production. The raw materials used in integrated steelmaking include iron ore, metallurgical coal, and scrap steel. Integrated steelmaking is a two-step process that involves:
- Blast Furnace (BF), and
- Basic Oxygen Furnace (BOF)
Blast furnace (BF) uses raw materials such as coke, iron ore, sinter, and limestone to produce pig iron or molten iron. In this process, the raw material is supplied through the top of the furnace, and hot air is blown through the nozzles at the bottom. The hot air causes the coke to heat, initiating a carbon monoxide reaction, which combines with iron ore and sinter to form molten at the bottom of the furnace. The molten is called pig iron or molten iron and contains around 92-94% iron, 4% carbon, and small quantities of other elements. Pig iron is an intermediate product and cannot be used as-is. It is tapped out into ladles for further processing. The limestone in the furnace attracts impurities and forms a layer of waste called slag, which is light in weight and floats above the pig iron.
Basic oxygen furnace (BOF) involves further purification of pig iron to produce molten steel, also known as crude steel. In this process, pig iron and scrap steel are fed into the BOF, and oxygen is blown into the furnace through an oxygen lance. The reaction of oxygen with carbon burns off impurities in the pig iron and produces crude steel.
Mini Mill Steelmaking (EAF)
Mini mill steelmaking involves manufacturing steel from scrap steel. Scrap steel is fed into a furnace, and a lid containing three graphite electrodes is lowered into the furnace, which transmits electricity to melt the scrap steel. Next, oxygen is blown, and limestone is added to the furnace, removing impurities and forming a waste slag. Once the correct composition is achieved, the pig iron is moved into a ladle for further casting.
Secondary Steelmaking
Secondary steelmaking is the process of refining and adding finishing treatment to the produced crude steel. This process involves adding alloys and making adjustments to the chemical composition of crude steel to achieve different grades of quality of crude steel.
Continuous Casting
Continuous casting is the process of moving molten steel into molds that rapidly chill the metal to the point of solidification. The metal is then cut to the desired shape and length, depending on the application.
Industry Business Model
Steel Industry Business Model
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Steel companies generate revenue from the sale of two types of steel; carbon and stainless steel.
Carbon Steel
Carbon steel consists of up to 2% carbon; the higher the carbon content, the harder and stronger the steel. Carbon steel accounts for approximately 90% of globally manufactured steel products. It is classified into low, medium, and high carbon steel based on its properties and chemical composition, as elaborated below.
Carbon steel is further bifurcated into two primary product types; flat and long steel products.
Flat steel products are mainly produced using the integrated steelmaking process and have a wide range of applications across industries. Primary and semi-finished flat steel products are obtained by the continuous casting of liquid steel for further processing to produce coils and plates. The table below summarizes the different types, properties, and applications of flat steel products.
Long steel products, generally produced using the electric arc furnace (EAF), are round-shaped steel products, varying in length and width. Semi-finished long steel products such as billets and blooms are obtained by the continuous casting process and further processed into rebars, wire rods, and structurals. The table below summarizes the different types, properties, and applications of long steel products.
Stainless Steel
Stainless steel includes alloys such as chromium, nickel, and molybdenum making it corrosion resistant. It accounts for approximately 10% of global steel products. Stainless steel is generally produced by melting stainless steel scrap and other ferrous alloys (such as nickel, chromium, etc) in an electric arc furnace (EAF) to achieve higher corrosion resistance. It is widely used in surgical and dental tools, home appliances, and architecture, among others. The total revenue for stainless steel is derived from the volume and price of stainless steel.
Demand and Supply
The construction industry accounts for the majority of global steel demand. The largest construction market globally is China, making China the largest market for steel followed by India. In China and other developing countries, economic growth and industrialization are pushing infrastructure and construction spending, in turn driving steel demand. In developed countries like the U.S. and Japan, steel demand is driven by a broader base of end markets ranging from automotive to engineering and application industries. Apart from being the largest consumer of steel, China is also the largest supplier of crude steel.
Pricing
The pricing of steel largely depends on the demand and supply of the product. Unlike commodity prices, steel prices vary depending on the variety of finished steel products and country. China, as the largest consumer and supplier of steel, heavily influences the pricing of steel. Generally, as a reference, steel manufacturers determine the price for a particular steel product in a region. They then base the price of other steel products on this reference price. The price of a hot-roll coil (HRC) is often used to benchmark prices of steel products and a premium is added to this price for other steel products. Another key factor that determines steel prices is iron ore, which is the main raw material input in steel production. An increase in iron ore prices drives up steel prices and vice-versa.
Profitability
As a capital-intensive industry, a crucial factor in determining profitability for steel companies is EBITDA per unit. The two approaches used to calculate EBITDA per unit are:
- Average Realized Price -Cash Cost Per Unit, and
- Total EBITDA
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Steel Sales Volume
Realized prices and cash costs impact the increase/decrease in EBITDA per unit. An increase in realized prices tends to increase EBITDA per unit. However, this might not always be the case when accompanied by an increase in costs, which will lower EBITDA per unit. Thus, an increase in iron ore cost, a major raw material cost for a steel company, will lead to a fall in EBITDA per unit, and vice versa.
When understanding market expectations for the steel industry, whether at a company or industry level, here are some industry KPIs to consider:
Visible Alpha’s Standardized Industry Metrics
To understand market expectations for the steel industry, a key information source is sell-side analyst estimates and consensus forecast data. The buy-side, sell-side, and public companies leverage this type of data to conduct competitive analysis, a type of analysis conducted by professional analysts that involves comparing standardized metrics of one company with those of similar companies. Because companies report metrics differently – and sometimes report on different metrics altogether – standardizing the key metrics for each company can be a cumbersome process.
Visible Alpha Insights includes analyst data, company data, and industry data at a level of granularity unparalleled in the market. Our industry data – Standardized Industry Metrics – enables market participants to quantify and compare market expectations for companies across 150+ industries.
Data as of January 2023
59
Global Tickers
607
Current Analyst Excel Models
291
Proprietary line items in our standardized operating metrics data
68
Contributing Brokers
507
Total standardized line items
216
Proprietary line items in our standardized financials data
Visible Alpha offers 14 iron & steel-related comp tables, comparing forecasts for key financial and operating metrics, to make it easy to quickly conduct relative analysis, whether you are interested in looking at key values for steel companies globally, in the Americas, or Europe. Every pre-built, customizable comp table is based on region, sub-industry, or key operating metrics.
North America
- Nucor Corporation (NUE)
- United States Steel Corporation (X)
- Steel Dynamics, Inc. (STLD)
- Stelco Holdings Inc (STLC_CA)
- SCHNITZER STEEL INDUSTRIES INC (SCHN)
EMEA
- ARCELORMITTAL (MT_US)
- OJSC NOVOLIPETSK STEEL (NLMK_UK)
- EVRAZ PLC (EVR_UK)
- ThyssenKrupp AG (TKAG_DE)
APAC
- Nippon Steel Corporation (5401_JP)
- POSCO (005490_KR)
- Angang Steel (000898_CN)
- BlueScope Steel (BSL_AU)
- Tata Steel (TISC_IN)
LATAM
- Gerdau S.A. (GGB_US)
- Usiminas (USIM5_BR)
- CSN (CSNA3_BR)
Steel Industry KPI Terms & Definitions
Visible Alpha offers an innovative, integrated experience through real-time, granular consensus estimates and historical data created directly from the world’s leading equity analysts. Using a subset of the below KPIs, this data can help investors hone in on the key drivers of companies to uncover investment opportunities. Learn More >
Production Volume
Production volume is the total volume of crude steel produced in a given period.
Shipments
Shipment is the total volume of different types of steel sold in a given period.
Average Realized Price
Average realized price is the actual/estimated selling prices of different types of steel.
Cash Cost Per Unit
Cash cost per unit is the cash operating cost excluding depreciation & amortization divided by total steel shipments.
EBITDA Per Unit
EBITDA per unit is earnings before interest, tax, depreciation, and amortization divided by total steel shipments.
Alloying Element
Alloying element is any metallic element added during the melting of steel to increase the corrosion resistance, hardness, and/or strength of the steel. Chromium, nickel, and molybdenum are metals most commonly used as alloying elements in producing stainless steel.
Alloy Steel
Alloy steel is a type of steel alloyed with several elements such as nickel, silicon, chromium, and titanium, among others.
Bars
Bars are long steel products that are rolled from billets. Merchant bars and reinforcing bars (rebars) are two common categories. Merchant bars include rounds, flats, angles, squares, and channels that fabricators use to manufacture a wide variety of products such as furniture, stairs railings, and farm equipment. Rebars are used to strengthen concrete in highways, bridges, and buildings.
Billet
Billet is a semi-finished steel form that is used in long steel products. A billet is different from a slab because of its outer dimensions; billets are normally two to seven inches square, while slabs are 30 to 80 inches wide and two to ten inches thick.
Blast Furnace
Blast furnace is a metallurgical furnace lined with heat-resistant (refractory) bricks, used by integrated steel mills to smelt pig iron from iron ore. The furnace derives its name from the “blast” of hot air and gases forced up through the iron ore, coke, and limestone that load the furnace.
Bloom
Bloom is a form of semi-finished steel. Blooms are the intermediate-stage pieces of steel produced by a first pass of rolling that works the ingots down to a rectangular cross-section that is more than 8”. Blooms are also part of the high-quality bar manufacturing process.
Capacity
Capacity is the general ability of a steel company to produce crude steel in a given period.
Carbon Steel
Carbon steel is a type of steel that has properties made up mostly of the element carbon and which relies on the carbon content for structure. Most of the steel produced in the world is carbon steel.
Coating
Coating is a covering that is applied to the surface of an object, usually referred to as the substrate. The coating may be used for decorative or functional purposes. The process of covering steel with another material (tin, chrome, and zinc), is primarily for corrosion resistance.
Coke
Coke is a processed form of coal. It is the basic fuel consumed in a blast furnace for the smelting of iron.
Crude Steel
Crude steel is a raw form of steel, also known as molten steel or pig iron, which is further processed to make end products.
Electric Arc Furnace (EAF)
Electric arc furnace (EAF) is a steel-making furnace where scrap steel is heated and melted by the heat of electric arcs striking between the graphite electrodes and the metal bath.
Extrusion
Extrusion is the process of shaping material by forcing it to flow through a shaped opening in a die.
Coils
Coils are the most efficient way to store and transport sheet steel.
Galvanized Steel
Galvanized steel is steel coated with a thin layer of zinc to make it corrosion resistant to be used in underbody auto parts, garbage cans, storage tanks, or fencing wire.
Hot-Rolled Steel
Hot-rolled steel is a coil of steel rolled on a hot-strip mill (hot-rolled steel). It can be sold to customers in its original form or further processed into other finished products.
Cold-Rolled Sheet
Cold-rolled steel is sheet steel that has been pickled and runs through a cold-reduction mill. Cold-rolled sheet is considerably thinner and stronger than a hot-rolled sheet and thus sells for a premium.
Long Steel Products
Long steel product is a classification of steel products that includes a bar, rod, and structural products that are ‘long’, rather than ‘flat’.
Pellets
Pellets are iron ore particles, typically rolled into 6-16 mm balls and used as a raw material for blast furnaces. Pellets typically have 64-70% iron content.
Reinforcing Bar (Rebar)
Reinforcing bar (rebar) is commodity-grade steel used to strengthen concrete in highways and building construction.
Scrap Steel
Scrap steel is a ferrous (iron-containing) material that is generally remelted and recast into new steel.
Semi-finished Steel
Semi-finished steel includes steel shapes — such as blooms, billets, or slabs — rolled into finished products such as beams, bars, or sheets.
Slab
Slab is the most common type of semi-finished steel. Traditional slabs measure ten inches thick and 30–85 inches wide and average at about 20 feet long, while the output of the recently developed ‘thin-slab’ casters is approximately two inches thick. After casting, slabs are sent to the hot-strip mills and rolled into coiled sheet and plate products.
Stainless Steel
Stainless steel is the term for grades of steel that contain more than 10% chromium, with or without other alloying elements. Properties of stainless steel include corrosion resistance and the ability to maintain strength at high temperatures.
Specialty Steel
Specialty steel is a category of steel that includes electrical (see silicon electrical steel), alloy (see alloy steel), stainless (see stainless Steel), and tool steel.
Structurals
Structural is a steel product group that includes I-beams, H-beams, wide-flange beams, and sheet pilings. These products are used in the construction of multi-story buildings, industrial buildings, bridge trusses, vertical highway supports, and riverbank reinforcement.
Unit Metrics
- Metric Ton (mt) – A unit of mass and weight equal to 1,000 kilograms, or 2,204.6 pounds.
- Gross Ton: 2,240 pounds.
- Long (Net) Ton: 2,240 pounds.
- Short (Net) Ton: 2,000 pounds. Normal unit of statistical raw material input and steel output in the U.S.
Conversions
- 1 Long Ton = 1.01605 metric ton (mt)
- 1 Short Ton = 0.907185 metric ton (mt)
- 1 Pound = 0.000453592 metric ton (mt)
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Guide to Steel Industry KPIs for Investment Professionals
This guide highlights the key performance indicators for the steel industry and where investors should look to find an investment edge, including:
- Steel Industry Business Model & Diagram
- Key Steel Industry Metrics PLUS Visible Alpha’s Standardized Industry Metrics
- Available Comp Tables
- Industry KPI Terms & Definitions
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