An empirical analysis of structural forces in refractory metal markets

  • The record price development in commodity markets during the economic boom period lasting from early 2000 to mid 2008 highlighted a perceived scarcity particularly in metal markets that contrasted the preceding period beginning in the late 1970s of largely abundant availability and falling real metal prices. While the fly ups in metal prices were most visible for exchange traded non-ferrous base metals, refractory metals used predominantly as alloys in the production of steel grades experienced an even stronger price rise. Whereas annual prices and production volume for non-ferrous metals rose by 12.2 percent and 4.9 percent respectively from 2001 to 2008, the aggregate price index for refractory metals rose by 17.6 percent annually, despite an average annual increase in the production volume of 9.6 percent. Scholars are in disagreement how to evaluate the recent commodity boom with respect to its long-term impact on metal prices. Also, the primary focus of the discussion on metal markThe record price development in commodity markets during the economic boom period lasting from early 2000 to mid 2008 highlighted a perceived scarcity particularly in metal markets that contrasted the preceding period beginning in the late 1970s of largely abundant availability and falling real metal prices. While the fly ups in metal prices were most visible for exchange traded non-ferrous base metals, refractory metals used predominantly as alloys in the production of steel grades experienced an even stronger price rise. Whereas annual prices and production volume for non-ferrous metals rose by 12.2 percent and 4.9 percent respectively from 2001 to 2008, the aggregate price index for refractory metals rose by 17.6 percent annually, despite an average annual increase in the production volume of 9.6 percent. Scholars are in disagreement how to evaluate the recent commodity boom with respect to its long-term impact on metal prices. Also, the primary focus of the discussion on metal markets and metal price development is based on insights derived from non-ferrous base metal markets. An in depth analysis of refractory metal markets matching the level of quantification found in works on non-ferrous base metals is missing. The upward trend in demand for refractory metals ascribes to both an unprecedented surge in demand and to structural changes in the supply of alloyed materials. Contained only in traces in the end product, these invisible metals effectuate indispensable functions in steel grades, predominantly corrosion resistance, strength and high temperature strength. Driving the demand for these functions are long-term industry trends, which may be clustered as weight saving, advancement of operating parameters, quality improvement and operations in increasingly corrosive environments. While these trends are not new, the surge in demand for sophisticated steel grades in developing countries to establish an adequate industrial infrastructure, a rising class of influential consumers in emerging economies, an increasing awareness for climate change and for a sustainable, efficient use of resources as well as constructions in increasingly corrosive environments such as the gulf region and polluted areas in emerging economies have all accelerated the demand for lighter and more enduring steel grades during the last decade. This development is reflected in the increasing intensity of refractory metals in steel not only in emerging but also in advanced economies during the commodity boom. The solidity of these trends lends credence to the hypothesis that they will continue undeterred by the economic crisis beginning mid 2008. Furthermore, the concentration of molybdenum and niobium in domestically produced steel in advanced economies is still higher by a factor of three compared to emerging ones. This implies that emerging economies, notably China as the dominant global steel producer have still a long way to come to catch up to advanced economies' levels. Both developments suggest solid demand growth for refractory metals going forward. The growing economic relevance of refractory metals underlines the importance of a reliable and secure supply. Here, selected refractory metals have undergone a structural change in the composition of supply and are particularly exposed to induced scarcity situations and consequently price fly-ups and have become a weighty factor with respect to cost, risk, revenue and profit of hitherto unknown relevance. Suppliers begin to reevaluate the significance of these metals in their portfolio and the revenue and profit opportunities that stem from it. Strong demand secures the profitability of developing hitherto uneconomic assets and introduces a new floor price as the cost position of the marginal producer rises and the tail of the cost curve becomes steeper. Metal consuming industries, notably steel producers in countries relying on imports, are faced with a highly concentrated production profile in most refractory metal markets and are dependent on the willingness of exporters to trade. The work intends to contribute to the discussion on the long-term impact of the commodity boom on metal prices. It enlarges the scope of metal markets in the focus of research to date by focusing particularly on refractory metal markets and illustrates through which forces structural changes in metal markets occur and how this may impact level and volatility of metal prices. This approach complements existing metal price research by integrating industry insights and research findings in a framework to establish a holistic approach to price analysis. The insights gained are meant to contribute to prospective studies by scholars from various backgrounds and to the lively debate about the future development of metal prices.show moreshow less
  • Die vorliegende Arbeit beschäftigt sich mit der Frage nach den Auswirkungen des vergangenen Metallpreisbooms auf ausgewählte Metallmärkte. Insbesondere werden strukturelle Veränderungen in Metallmärkten im Zeitraum von 2000 bis 2008 untersucht und in einem deskriptiven Modell systematisch zusammengefasst. Im Fokus der Arbeit stehen Legierungs- und Refraktärmetalle.

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Metadaten
Author:Dirk Johannes Langhammer
URN:urn:nbn:de:bvb:384-opus-17294
Frontdoor URLhttp://opus.bibliothek.uni-augsburg.de/opus4/frontdoor/index/index/docId/1528
Title Additional (German):Eine empirische Analyse struktureller Einflüsse in Refraktärmetallmärkten
Advisor:Armin Reller
Type:Doctoral Thesis
Language:English
Publishing Institution:Universität Augsburg
Granting Institution:Universität Augsburg, Mathematisch-Naturwissenschaftlich-Technische Fakultät
Date of final exam:2010/09/24
Release Date:2011/05/05
Tag:economic dynamics; molybdenum; price increase; raw material scarcity; refractory metals
GND-Keyword:Chrom; Hochschmelzendes Metall; Knappheit; Metallmarkt; Molybdän; Niob; Preissteigerung
Institutes:Mathematisch-Naturwissenschaftlich-Technische Fakultät / Physik/Materialwissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoVeröffentlichungsvertrag für Publikationen ohne Print on Demand

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