Authors: A.M. Kotas and R.F. Price
Abstract
The ferrous and non-ferrous metal sectors share a number of similarities. Both are highly capital intensive industries. Both sectors are also subject to major swings through the economic cycle in terms of demand volume and market prices. At the same time the two are also different along one key dimension. Whilst at an average point in the cycle, aluminium, copper, and zinc prices are of the order of US $1,000 to $2,000 per tonne, carbon steel prices are closer to $200 to $500 per tonne. This price differential has the important consequence that, whilst refined non-ferrous metals can be transported to international markets some distance away, marketing of steel has a far more local flavour. Indeed, almost two thirds of steel that is produced today does not cross any borders at the first point of consumption. In the non-ferrous metal sector, we estimate this figure as closer to 20-30%. As we shall later see, the issue of product ‘transportability’ is likely to have important consequences for the way in which the ferrous and non-ferrous metal sectors might evolve. At this point however it is perhaps instructive to review some of the progress made in restructuring during the 1990s.
