The Grey Chronicles

2008.August.21

NSC’s CRC Production vs. Average CRC Prices


NSC’s products were sold to various domestic and foreign customers. Domestic prices were based on prevailing retail export Asian prices in US dollars. Most NSC’s CRCs were usually sold to customers based on these retail prices, converted to equivalent currencies for foreign customers.

Sales of HRC were very minimal and sporadic, said one former HSM QA supervisor, because most HRC produced at Hot Strip Mill No. 2 were delivered to Cold Strip Mills for further processing. NSC was more into selling CRCs and Tinplates to domestic markets rather than selling the bulk of its HRC.

NSC price strategy, according to a senior manager, is import parity pricing scheme—products are priced not higher than the landed cost equivalent imported steel products. Landed cost of imported steel is equivalent to FOB cost and freight multiplied by some factors—foreign exchange rates, bank charges and insurance, custom duties, VAT, and handling charges. NSC domestic market price would then be equivalent to the landed cost of imported steel material less discounts/incentives.


Minitab14)

Figure 29: Scatter Plot with Regression Line of NSC's CRC Production vs. Average CRC Prices (Data: NSC, Graph: Minitab14)

The Pearson correlation of CRC Production and CRC Average Price is 0.664. The Scatter Plot in Figure 29 illustrates that CRC production is positively correlated to average CRC prices based on the lowest and highest published retail prices.

In totality, NSC monthly flat carbon steel production shows a strong correlation to the following monthly steel prices: Global, Flats, Asia, and North American Steel Price indices. Quarterly NSC (CRC) production is positively correlated to all Steel Price Indices, but show higher correlation to Asia Flats and Global Steel price indices.

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