The client was providing strategic advice to companies which have been recently affected by exports of Chinese steel products to a certain country in South America.
Part of the information that the client needed was about site operating costs for steel BOF rebar producers in China. Such information was going to be later used by the client to estimate domestic prices in order to compare them to observed export prices - and if this comparison showed a significant difference among prices, then they could ask for protectionism measures. CRU only acted exclusively as data and analysis provider to the client, and CRU did not provide any opinion.
Methodology
Based on CRU’s internal cost data and Steel Cost Model, we estimated site operating costs for a representative Chinese BOF plant. The definition of a representative Chinese mill was also part of the scope, as the results were highly dependent on this. An important issue when providing Chinese steel cost estimates was about determining the actual prices for key supplies such as iron ore, met coal, electricity, etc. Given that this kind of information is not public and is subject to lots of interpretations linked to Government subsidies, we used the deep knowledge we have about the Chinese industry based on the presence CRU has in China. This allowed us to review this kind of costs, together with by product prices in the local Chinese market, in detail, finally achieving highly robust results.
After this experience, we can now face the challenge of assessing Chinese steel costs in detail more efficiently. Lots of research was needed and many discussion sessions were required to really understand the macro context for many cost items in China
Outcome
The client was pleasantly surprised about the quality of the information we presented for the Chinese steel industry.
