McKinsey on Metals & Mining
Short-selling the Earth?
In this special issue of McKinsey on Metals & Mining we share findings from our research into the evolving markets for steel raw materials, with a particular focus on iron ore.
The recent changes in pricing for iron ore and coking coal on emerging spot markets are, in our view, the beginning of an irreversible trend. Through spot markets, iron ore and coking coal are entering the virtual worlds of financial transactions on global exchanges. As they are key inputs for steelmaking, their price volatility will also accompany semi-finished and finished steel products downstream, making them more volatile as well. In this light, looking at steel raw materials is relevant not only for steelmakers, but also for major end-user industries, such as the automobile industry.
To get a better understanding of the drivers and implications of this trend, we have looked at existing commodity markets for useful comparisons and contrasts and have also identified what action steelmakers might start taking now in order to adapt to the new conditions. Overall, the perspective for steelmakers is an encouraging one. Market evolution in steel raw materials offers a new source of competitive differentiation that companies can learn.
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