August 2004

World Steel Industry Operating Profit Margins Reach 10% in 2003

London— The booming world steel industry, spurred on by China’s ravenous appetite for steel, is leading to bumper rewards for most of the world’s largest companies, with the best performers in developing countries. A global survey of steel company financial performance published by Integer Research has revealed that all but two of the top twenty most profitable steel makers in 2003 were based in developing countries.

Most producers have seen some positive impact from the recent high steel prices. The average operating profit margin in the industry reached 10% in 2003, up from 6% in 2001. The fifty companies analyzed in the report accounted for 56% of world steel production and had steel revenues of U.S. $230 billion in 2003. On an operating basis, six of the top twenty best performing companies were based in China, four based in Russia and three in Brazil. In contrast, the leading players in North America and West Europe registered lack luster performance, making up eight of the bottom ten performers.

This illustrates an industry undergoing rapid transformation. Primary production is shifting to developing countries with a competitive edge in raw material resources and labor costs. On the other hand, faced with declining competitiveness, many steel businesses in North America, Europe and Japan have been forced to consolidate their operations and concentrate on value-add finishing. This change has presented opportunities for those best placed for acquisition, and is driving a wave of consolidation. Half of the world’s ten biggest manufacturers were engaged in a major merger or takeover in the last few years.

The Steel Financial Insight Report is the most comprehensive survey of the world’s biggest steel producers and the only report that ranks the steel industry on revenues rather than volume. The report, published in July 2004, covers AK Steel, Angang, Arcelor, Azovstal, BaoSteel, Beijing Shougang, Benxi, Bluescope, ChinaSteel, Corus, CSN, CST, Dofasco, Duferco, Erdemir, EvrazHolding, Gerdau, Illich, INI Steel, ISG, JFE Holdings, Kobe Steel, Krivorozhstal, LNM Ispat, Maanshan Steel, Mechel, MMK, Nippon Steel, NISCO, Nisshin Steel, Novolipetsk, Nucor, POSCO, Rautaruukki, Riva, SAIL, Salzgitter, Severstal, SSAB, Stelco, Sumitomo Metal Industries, Tangshan, TISCO, Techint, Thyssen, US Steel, Usiminas, voestalpine Stahl, Wuhan, and Zaporizhstal.