MetalMiner is pleased to re-introduce guest columnist Jack Taylor. Jack is an independent metals analyst and consultant focusing on ferrous and base metals used in the energy industry. Prior to working as an independent metals consultant, he worked at PowerAdvocate as an Energy Business Analyst and at Independence Investments covering the automotive and transportation sectors. He can be reached at JTaylorMA(at)gmail.com
Over the past few months, readers of MetalMiner have sent emails asking, “what is the price of Grain-Oriented Electrical Steel (GOES) and Non-Grain Electrical Steel (NGOES)? and “where can I find current and historical pricing? Well, I have some good news and some more good news. MetalMiner will be publishing a monthly North American GOES index starting in late July. Historical data will be published as far back as 2004, and although we do have data as far back as 2000, much of the index is relatively flat compared to today’s numbers. The GOES index model is a proprietary mix of market intelligence, industry contacts, and government data that also form the basis of a forecasting model which I wrote about in the last two GOES articles (here and here). The North American GOES information will be available via MetalMiner IndX(SM).
In the near future, MetalMiner IndX(SM) will also release a North American NGOES index. NGOES, unlike GOES, has magnetic properties in all directions. NGOES is a less efficient electrical steel when compared to GOES; it is mainly used when companies need to lower costs. Furthermore, given that NGOES involves a less complicated manufacturing process than that of GOES, barriers to entry are few in the world market among already-operating steel mills possessing a significant capital expenditure budget for R&D. For some steel mills, NGOES represents an interesting opportunity as margins are significantly higher than high-volume produced steels and rising energy demand continues to place upward pressure for power generation products. NGOES is widely used in the production of generators, alternators, ballasts, distribution transformers, and motors used in appliances.
Both GOES and NGOES pricing vary significantly from customer to customer depending on source location (tariffs), product specifications, order volume, and general economic conditions. But all of this fails to answer the question, “What is the price of GOES?” As every GOES buyer’s need differs within a complex marketplace, let’s look at specification and then jump right into historical pricing to give an idea of a base-level market pricing. GOES used around the world generally breaks down into classes from M2 to M6, where M2 (0.18mm) represents the thinnest material and M6 (0.35mm) the thickest. From the power generation perspective, only M2 to M4 are of concern, given that the Department of Energy phased out the use of M5 and M6 used in the production of transformers domestically due to their lower efficiency value. In layman’s terms, think of it this way: wearing many thin layers of clothes vs. one big sweater should improve thermal efficiency many thin layers of GOES improves the efficiency of the electricity that travels through the transformer core.
Back in 2006, GOES prices began to climb higher as demand started to outpace supply as a result of China and India increasing their appetite for transformers in order to serve their power needs. Base price in 2000 for GOES was near $1,000 (short ton), but jumped to as much as $3,500 during 2006 according to government estimates. In contrast, the price of cold roll sheet steel in 2000 was around $350, rising to $600 by the end of 2006. Many in the energy sector became further alarmed when GOES prices climbed 37 percent at the end of September 2008 before losing traction and settling back to pre-recession numbers. Currently, the GOES index is tracking 10 percent less than 2008 highs yet is anticipated to rise moderately by year end.