The Grey Chronicles

2009.July.1

Volcanoes and Death Spirals



The previous post entitled Opps … The Philippines Is Not [Yet] In Recession! triggered memories of my short-stint as Analyst, Business Strategy. Aside from monitoring the Philippine economic aspect, one of Key Performance Indicators required me to be abreast with all things about the steel industry, especially the steel price movement.

While researching for my master’s thesis, moreover, a visit to the World Steel Dynamics [WSD] site became an eye-opener. There was this graphic there describing the world hot-rolled band export price as Volcanoes and Death Spiral. Unfortunately, WSD is now a paid-subscription site, thus with no sponsor to finance the same, my recent visit to the site was limited to the home page, thus I am not aware whether this graphic has recently been updated.

In the WSD’s graphic, the world hot-rolled band [HRB] export price of $475/ton in May 1995 was called a Volcano, the $333/ton in April 2000 and $350/ton in February 2003 were christened as mini-volcanoes. Meanwhile, $185/ton in December 1998, at the peak of the Asian Financial Crises, was called Death Valley, then hitting Rock Bottom at $175/ton in December 2001, and the $250/ton in June 2003 was named Death Spiral Threat, followed with raw material price spikes which culminated in to the Massive Eruption at $625/ton in September 2004. From a peak to bottom, the declines were named: Death Spirals.

WSD graphic ended at $633/ton in January 2008. Thus, instead of posting that graphic, I have updated it to include the most recent prices using world hot-rolled band prices in dollars per ton ($/t) data from Steel Business Briefing [SBB] Daily Briefing.

WorldSteelDynamics’s Volcanoes and Death Spirals II

Studying the trend, the world hot-rolled band Volcanoes take longer duration to evolve than Death Spirals. Between 1994 to the present, the longest duration for a Volcano erupting is 26 months. Even with the raw materials spike after June 2003, the volcano spewed a massive eruption only after 15 months! In contrast, the longest Death Spiral took about 20 months between April 2000 to December 2001, the shortest was all of two months in 2005.

The world hot-rolled band [HRB] took a 9-month Death Spiral from $475/ton in May 1995 to $255 in February 1996, a 13-month duration to &#345/ton in April 1997, followed with a 19-month Death Spiral from $345/ton in April 1997 to the Death Valley at $185 in December 1998.

The export price took another 20-month Death Spiral from $333/ton in April 2000 to the Rock Bottom at $175 in December 2001, followed with the longest surge duration of 26 months before a Mini Volcano at 350/ton in February 2003, thereafter a 4-month Death Spiral to the Death Valley Threat at $250 in June 2003.

This was followed by the supposedly Massive Eruption at $625/ton in September 2004 then a 10-month Death Spiral from that to $390 in July 2005. Another eruption took six months from $400/ton in December 2005 to $610/ton on June 2006.

After that, the world HRB export price experienced what WSD termed as The Snake for about a year from June 2006 to July 2007. Then a massive eruption, probably should be called a Super Volcano Eruption, occurred at $652/ton in November 2008, followed by a 7-month [?] Death Spiral to $448/ton in May 2009.

Moreover, if the May 2009’s $448/ton is the end of the recent Death Spiral of HRB prices, then this is still higher than the previous one at $390/ton last July 2005. But there is light at the end of the tunnel, so to speak.

Flat Index Prices Trend of Flat Index Price Change

Recent data from SBB, see above, shows that between November 2008 to June 2009, last month’s actual world hot-rolled band price rose from $448/ton in May 2008 to a comfortable $477/ton, boosted by recent slight increases particularly for Asian and North American prices. Flat steel index prices virtually have risen starting April 2009, at least for Asian, North American and European export prices. It should be noted, however, that the flats index price change for North America has yet to cross the zero border.

Likewise, Mysteel Weekly (2009) reports:

“After Baosteel, the Chinese steel giant, raised its ex-works prices for July shipments, many domestic steelmakers followed suit by pushing high quotations and releasing capacities. Yet with demand still sluggish and export contracting, China’s steel industry may be heading toward an era of high risks.”

Similarly, the recent CRU Monitor (2009), with Asian prices leading the way, announces:

“Global sheet prices have bottomed out for now. This is reflected in the CRUspi for steel sheet which, after 10 months of consecutive falls, has finally made gains. . . Underlying demand remains weak in most markets, so the price turnaround is based on an end to destocking and limited supply more than anything else.”


Notes:

CRU Monitor (2009). Steel sheet products: Hot-rolled, cold-rolled and galvanised sheet, CRU Monitor. London: CRU International Limited, 10 June 2009. pp. 1-2. back to text

Fu, Michael [ed.] (2009). Mysteel Weekly. Issue 127. Shanghai: Mysteel Research Institute, 23 June 2009. 4pp. back to text

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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1 Comment »

  1. […] Volcanoes and Death Spirals « The Grey ChroniclesJul 1, 2009 … WorldSteelDynamics’s Volcanoes and Death Spirals II … Flat steel index prices virtually have risen starting April 2009, at least for Asian, North … […]

    Pingback by Steel volcanoes | Kiboexpedition — 2012.September.8 @ 23:33 | Reply


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