CASE STUDY

Creating a Revenue Cost Model and Increasing Exports in the Steel Market

May 8, 2019

The Business Problem

The continued volatility and dynamics in the world economies were creating relentless pressure on the client, a leading steel company to remain competitive in the European Union (EU) steel market. The company mainly relied on basic oxygen furnace (BOF) for production and the likelihood of an increase in existing carbon prices and regulatory intervention was exposing the company to additional costs. Moreover, inaccurate market insights were creating difficulties for them to gauge changing customer preferences in the steel market. This compelled them to engage with SpendEdge and identify cost elements that were the key drivers of cost.

Analyzing the steel market is crucial for companies to determine prices and ensure a smooth steel supply across the supply chain.  Request a free proposal and access our complete portfolio of cost analysis solutions to estimate steel prices.

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Solutions Offered and Client Journey

The experts at SpendEdge conducted a complete cost model analysis to assess the impact of each cost driver on the overall cost of steel. They analyzed the EU steel market and recommended the client to focus on Ultra-low-carbon Dioxide Steelmaking (ULCOS) programme. This helped the client to take initiatives that were capable of reducing Carbon dioxide emissions and increase brand value in the steel market.

SpendEdge’s experts also realized that the company needed to set 2020 emissions intensity targets in order to implement robust, responsive and resilient business strategies. They formulated a systematic management process to monitor the annual budget of production costs and understand expected profitability. The engagement thus enabled the client to accurately value inventory stock in real-time to meet the demand for rolled products in the global steel market.

Want to track steel prices and address changing consumer demands in the steel market?Request a free demo and know how cost analysis can help you in ensuring steel supply and managing the cost of steel.

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Key Findings and Outcome

Integrated cost planning

The total cost analysis performed integrated the company’s sales and operations (S&OP) process. This provided them precise insights of the next 12 months for demand and constrained capacity across cast iron and metal iron used for the production of steel. This helped them to create the revenue cost planning model that reflected factors such as routings and yield prevailing in the steel market. For detailed insights, request for more information.

Increased exports

The integrated cost planning helped the client to ramp up the exports against the background of contracting domestic demand and rising regulatory intervention. They were able to build their presence in the US steel market for seamless tubes by shifting the competition from price to product quality.

Overview of the Global Steel Consumption Trends 

graph

What are the Latest Trends in the EU Steel Market?

The EU steel market is expected to remain stable in 2019. The automotive industry that accounts for almost 20 percent of the consumption in the region will boost demand for steel supply. However, the demand for steel will remain lower than in 2017 and will remain concentrated in Central European regions where infrastructure investments will support the steel market.

The EU is consistently working to protect companies in the steel market from a combination of low prices, high costs, and cheap imports. The anti-dumping levies imposed on certain suppliers of hot rolled products from Russia, Brazil, and Ukraine will further help EU producers strengthen their position in the steel market.

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