Volcanic eruption in steelmakers' costs since 2002

The bad news for the mills: In WSD's opinion, pricing is deteriorating and costs are going through the roof.

The good news: A number of companies will be winners in the decade ahead (including WSD's list of "world-class" steelmakers).

Notwithstanding the imponderables – as the steel industry makes the transition to the new continuum – WSD still thinks that a sufficient number of new relationships have developed in the past 18 months, and/or seem poised to develop, for us to forecast that a good number companies will be winners in the decade ahead. Keys to success will include low costs, new strategies, unit growth, mergers and acquisitions, returns on new investment, schemes to purchase raw materials on a lower cost basis (in view of the 119% rise in coking coal costs and 71.5% rise in iron ore costs for 2005), the implementation of new technologies and good positioning in the right markets and regions.

WSD expects good profits over the steel cycle in the next decade for selected steel companies based on a number of macro assumptions.

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