3A-i

APPENDIX 3A. CORE STEEL MARKET ANALYSIS

TABLE OF CONTENTS

3A.1 INTRODUCTION ...................................................................................................2

3A.1.1 U.S. Steel Market History........................................................................................2

3A.1.2 U.S. Electrical Steel Market Key Players................................................................3

3A.1.3 International Electrical Steel Market Key Players...................................................3

3A.1.4 U.S. Import/Export Data ..........................................................................................4

3A.2 CURRENT GLOBAL ELECTRICAL STEEL MARKET .....................................5

3A.1.5 Asian Steel Consumption.........................................................................................5

3A.1.6 Core Steel Manufacturer Input Prices......................................................................6

3A.1.7 Value of the U.S. Dollar ..........................................................................................8

3A.1.8 Global Economic Recession ....................................................................................9

3A.3 U.S. ELECTRICAL STEEL PRICING...................................................................9

3A.1.9 U.S. Electrical Steel Producers................................................................................9

AK Steel...................................................................................................................9

3A.1.10 Steel Pricing...............................................................................................10

3A.1.11 U.S. Electrical Steel Pricing.......................................................................10

3A.1.12 Amorphous Core Material .........................................................................12

3A.1.13 Material Price Sensitivity Analysis............................................................13

3A.4 ELECTRICAL STEEL MANUFACTURER PROFILES.....................................13

3A.1.14 AK Steel.....................................................................................................13

3A.1.15 Allegheny Ludlum .....................................................................................13

3A.1.16 Nippon Steel Corporation ..........................................................................13

3A.1.17 JFE Steel Corporation................................................................................14

3A.1.18 Novolipetsk Metallurgical Plant ................................................................14

3A.1.19 Tata Steel (Cogent Power Ltd.) .................................................................14

3A.1.20 ThyssenKrupp Steel...................................................................................14

3A.1.21 China Steel Corporation.............................................................................15

3A.1.22 Pohang Iron and Steel (POSCO)................................................................15

3A.1.23 Shanghai Baosteel Group Corporation ......................................................15

3A.1.24 Wuhan Iron and Steel Company................................................................15

3A.1.25 ArcelorMittal..............................................................................................15

3A.1.26 Stalprodukt S.A..........................................................................................16

3A.1.27 Angang Steel..............................................................................................16

LIST OF TABLES

Table 3.1 Grain Oriented Electrical Steel Key Players...................................................... 4

Table 3.2 Alloy Surcharge for Electrical Steels (US$/ton)................................................ 8

Table 3.3 Selected International Currency Rates per U.S. Dollar ..................................... 8
3A-ii

LIST OF FIGURES

Figure 3.1 Average Annual Prices for Grain Oriented Steels in the U.S. ($/lb)................ 7

Figure 3.2 Average Annual Prices for Grain-Oriented Steels in the US (2010$/lb) ....... 11

Figure 3.3 Average Annual Prices for Specialty Steels in the US (2010$/lb, note: SA1 is 

finished core) .................................................................................................................... 12
3A-1

APPENDIX 3A. CORE STEEL MARKET ANALYSIS

Core steel is one of the major cost drivers of a distribution transformer and is 

fundamentally linked to the efficiency of the finished transformer. When looking at the impact 

of energy conservation standards on the distribution transformer industry, it is therefore 

important to understand the core steel market. 

Starting in late 2003, transformer manufacturers began to experience increases in the 

price of core steel. While prices vary across the industry (i.e., generally based on the volume of 

an order and negotiated contracts), some manufacturers witnessed approximately a doubling in 

the core steel prices in 2005, as compared with 2002. The price continued to increase through 

2007 until the effects of the U.S. financial crisis began to propagate throughout the global 

economy causing a significant drop in steel prices. However, the price has recently started to 

increase from inflation, rising material input costs, and increased demand in Asia. 

During the Department of Energy’s (DOE) previous rulemaking on distribution 

transformers, spanning from 2000 to 2007, DOE received comments about the rapid increase in 

core steel prices. The two main issues raised were: 1) the cost-effectiveness of higher standards 

given higher core steel prices, and 2) the availability of sufficient quantities of higher grade 

steels needed to manufacture more efficient transformers.

To address these comments and concerns, DOE studied the electrical core steel market, 

seeking to understand what had caused these changes. In conducting this study, DOE reviewed 

publicly available reports, press releases, and articles pertaining to both the steel industry and the 

global core steel market. DOE also consulted with U.S. core steel manufacturers, several core 

steel processing companies, and transformer manufacturer purchasing managers. Finally, DOE 

conducted additional engineering and life-cycle cost analyses using material price sensitivities to 

understand how the higher material prices might impact the cost effectiveness of the standard 

levels being considered. 

For the current rulemaking on distribution transformers, manufacturers commented 

during interviews for the preliminary analysis that core steel prices and core steel availability 

were still a concern in the industry. Manufacturers indicated that higher standard levels would 

likely result in greater demand for higher grades of core steel, which have a limited global 

supply. In response, DOE updated its previous study on the core steel market. Additionally, 

DOE examined material price sensitivities to understand how fluctuating material prices might 

impact the cost effectiveness of the standard levels being considered (see Appendix 5C).

Section 3A.1 of this appendix provides background on the U.S. and international core 

steel markets and U.S. import/export data. Section 3A.2 describes the current global core steel 

market. Section 3A.3 presents U.S. electrical steel pricing data and a description of the pricing, 

supply, and suppliers of amorphous metal. Finally, Section 3A.4 provides brief company 

profiles of the major global core steel manufacturers.
3A-2

3A.1 INTRODUCTION

Energy-efficient, grain oriented electrical steel is a unique product. It has a high silicon 

content, which complicates its manufacture. It has to be carefully processed, rolled to the correct 

thickness, and heated and cooled at controlled rates to facilitate the growth of steel grains. 

Globally, about 13.3 million metric tonnes (―tonnes‖) of electrical steel were produced in 2008, 

representing a little over 1 percent of the global steel market. Of this 13.3M tonnes of electrical 

steel, only 16 percent, or 2.16M tonnes, were attributable to grain oriented electrical steel, the 

type used in distribution transformers. Estimates show that 2.5M tonnes of grain oriented 

electrical steel were produced in 2009.

1

 It is a highly specialized niche market product that is 

essential for the production of distribution transformers.

3A.1.1 U.S. Steel Market History

The U.S. steel market has experienced volatility over the last three decades. During the 

1980s and the 1990s, mills were closed, and producers reduced their workforce and capacity, 

while investing in new steel processing technologies. This restructuring resulted in productivity 

increases, with the U.S. emerging as a world leader in low cost steel production. Prosperity in 

the steel industry continued through 1996 as capacity and demand increased.

However, in 1997 the steel market began to change as imports increased to meet the 

growing U.S. demand. Steel imports increased seven percent from 1996 to 1997, in part due to 

the relative strength of the dollar in the late 1990s.2 In 1998 the change was noticed as hot rolled 

steel imports increased by 70 percent, prices dropped nearly 20 percent, capacity utilization rates 

decreased to 75 percent, and six steel companies declared bankruptcy.3 The "1998 steel import 

crisis" was caused in part by the Asian financial crisis that began in 1997, in which the 

currencies of several countries plummeted, in concert with sharp declines in steel consumption in 

these countries.2

The years 1998, 1999, and 2000 were the three highest import years in U.S. steel history 

at the time, which drove down prices. Imports for several major product lines, including rebar, 

coiled plates, and cold rolled steel, continued to increase and some U.S. producers were forced to 

declare bankruptcy. The high value of the U.S. dollar during that time period contributed to the 

crisis.

From 2000 to 2007, the U.S. steel market, and more specifically the US electrical steel 

market, began to experience pressure from several other directions. The demand in China and 

India for high-efficiency, grain oriented core steel limited availability to the rest of the world and 

drove up prices. Combined with cost-cutting programs and technical innovation at their 

respective facilities, the lower value of the U.S. dollar enabled domestic core steel suppliers to 

become globally competitive exporters.

In late 2007, the U.S. steel market began to decline with the onset of the global economic 

crisis. U.S. steel manufacturing dropped to nearly 50 percent of production capacity in 2009 

from almost 90 percent in 2008. Only in China and India did the production and use of electrical 

grade steel increase for 2009.4 In 2010, the price of steel began to increase. However, it was 
3A-3

more a reflection of the continually increasing cost of material inputs, such as iron ore and 

coking coal, than a definite market recovery.

3A.1.2 U.S. Electrical Steel Market Key Players

There are two domestic manufacturers of grain oriented electrical steels, AK Steel and 

Allegheny Ludlum. Both companies produce grain oriented electrical steel for domestic use and 

export. AK Steel is the only domestic producer of non-oriented electrical steel, sometimes used 

in low cost stacked cores. AK Steel is also the only domestic producer of high permeability, 

domain-refined (laser-scribed) core steel, used in high-efficiency stacked cores. 

AK Steel, founded in 1899 and headquartered in Middletown, Ohio, employs more than 

8,400 people in Ohio, Kentucky, Indiana, and Pennsylvania. With over $5 billion in sales, the 

company produces flat rolled carbon, stainless, and electrical steel products. AK Steel produces 

a range of electrical steels, including oriented steel grades of M2, M3, M4, M5 and M6, nonoriented standard steel grades of M15 to M47, high-permeability steels, and domain refined, 

laser scribed steels, H-O DR, H-1 DR, and H-2 DR.5

Allegheny Ludlum Corporation, headquartered in Pittsburgh, PA, operates specialty 

metals manufacturing facilities in Pennsylvania, Connecticut, Massachusetts, Indiana, and Ohio. 

Allegheny Ludlum employs approximately 3,800 people, and in addition to its other stainless 

and specialty steel products, produces grain oriented steel with grades from M2 to M6.6

Other key players in the U.S. core steel market include core steel wholesalers and 

processors. National Materials LP, an electrical steel processing and distribution company, has 

locations in Pennsylvania, Illinois, California, Michigan, and Mexico, and provides U.S. 

transformer manufacturers with both grain oriented and non-oriented slit core steel. The Tempel 

Steel Company, located in Chicago, Illinois, produces shunt and cut core sections and E-I 

laminations. The Ontario, Canada plant of Cogent Power, Inc., a joint venture between two 

international steel manufacturers, produces finished wound and stacked transformer cores and 

slits core steel for U.S. transformer manufacturers. Lastly, LakeView Metals Inc., based in 

Illinois, supplies non-oriented, grain oriented, and amorphous electrical steel products.

3A.1.3 International Electrical Steel Market Key Players

In addition to the two domestic producers, AK Steel and Allegheny Ludlum, there are 

currently eleven major international companies producing grain oriented electrical steel. These 

companies and their respective 2009 grain oriented electrical steel output are listed in Table 3.1. 

All of these companies, except Allegheny Ludlum, also offer non-oriented electrical steels.
3A-4

Table 3.1 Grain Oriented Electrical Steel Key Players

Company Country 2009 Production

[1,000 metric tonnes]

Wuhan Iron and Steel Company 

(WISCO)

China 440

Novolipetsk Steel (NLMK) Russia 344

AK Steel United States of America 312

Thyssen Krupp Electrical Steel 

(TKS) Germany, France, India 250

The Pohang Iron and Steel 

Company (POSCO) South Korea 250

Nippon Steel Corporation 

(NSC) Japan 243

JFE Steel Corporation Japan 160

Allegheny Ludlum (ATI) United States of America 109

ArcelorMittal Brazil, Czech Republic 107

Orb (Tata Steel, Cogent Power) United Kingdom 90

Baosteel Group Corporation China 90

Stalprodukt S.A. Poland 62

Angang Steel* China 300 (projected)

ArcelorMittal and Hunan Valin 

Steel Group (Joint Venture)** China 200 (projected)

* Angang Steel is currently developing a facility. It is expected to be completed in late 2010.7

** ArcelorMittal and Hunan Valin have begun a 50-50 joint venture to develop a facility in China. It is expected to 

be completed in 2010.8

Nippon Steel produces eight types (each with several grades) of grain-oriented electrical 

steel and five types of non-oriented electrical steel. JFE Steel produces nine types (each with 

several grades) of grain-oriented electrical steel and six types of non-oriented electrical steel. 

Novolipetsk has an annual capacity of 350,000 tonnes of electrical steel, including grain oriented 

and non-grain oriented steel.9 Wuhan has an annual capacity of 2 million tonnes of electrical 

steel, making it the largest electrical steel production base in the world. ThyssenKrupp Electrical 

Steel (TKES) produces grain-oriented steel, while ThyssenKrupp Stahl AG produces nonoriented electrical steel grades. See section 3A.4 at the end of this document for brief profiles on 

each of these players in the core steel market.

3A.1.4 U.S. Import/Export Data

Since the import crisis of 1998, the Federal government has monitored steel imports more 

closely. The Steel Import Monitoring and Analysis (SIMA) System was established in 2003 and 

reports amounts and types of steels being imported and exported monthly and annually.a

 

a The U .S. Department of Commerce - International Trade Administration's Steel Import Monitoring and Analysis 

System is available online at <www.ia.ita.doc.gov/steel/license>.
3A-5

From 2008 to 2009, imports of electrical steel fell from 110,000 tonnes to 60,000 tonnes,

indicating nearly a 50 percent reduction. This decline represents the continuing effects of the 

economic crisis beginning in late 2007. The Specialty Steel Industry of North America, a trade 

association based in Washington, D.C., reports that the U.S. consumption of electrical grade steel 

was approximately 345,000 tons in 2009, a 43 percent decrease from 2008.10 This U.S. 

consumption total includes core steel for more equipment than simply distribution transformers. 

However, DOE did prepare an estimate of the total consumption of core steel for distribution 

transformers by evaluating the shipment and engineering analyses. DOE estimated that 

approximately 200,000 tons of core steel is used each year for producing distribution 

transformers in the United States.

On the exporting side, the U.S. shipped 205,000 tonnes of electrical grade steel outside its 

borders in 2009 compared to 277,000 tonnes in 2008. In 2006, China and India imported about 

13 percent of U.S. exported electrical steel while Canada and Mexico together imported nearly 

50 percent. However, in 2009, China’s and India’s imports of U.S. electrical steel increased to 

about 40 percent while imports in Canada and Mexico decreased to only 25 percent of the total 

U.S. exports of electrical steel.11

3A.2 CURRENT GLOBAL ELECTRICAL STEEL MARKET

DOE was informed by a range of experts that the prices of core steel have been volatile 

over the time period from 2006 to 2008, and have generally declined from their 2008 highs. 

These trends are primarily due to four factors:

1. The continued increase in global demand for grain oriented electrical steel, particularly in 

China and India;

2. Higher raw material prices to the core steel manufacturers (e.g., iron ore, coking coal, 

scrap steel) and higher processing energy costs;

3. The low value of the U.S. dollar, (low value increases the cost of imported steel and 

encourages domestic suppliers to export); and

4. The onset of the global economic recession and financial meltdown in late 2007.

These factors are discussed in the following sections.

3A.1.5 Asian Steel Consumption

Over the past decade, Asia's demand for electrical steel has increased astronomically. It is 

the only region in the world that increased consumption of electrical steel from 2008 to 2009. In 

particular, the countries of China and India, with economic growth rates of 9.1 percent and 7.4 

percent, respectively, have both become large producers and importers of electrical steel as they 

expand their electrical grids. 12
3A-6

China became the largest steel consumer in the world when it surpassed the consumption 

of the United States and Japan combined in 2003.13 Between 2003 and 2009, Chinese steel 

consumption increased from 240 million tonnes to around 540 million tonnes, a 125 percent 

increase.14 Electrical steel is of great importance in China, due to the country's increasing energy 

consumption, concomitant with their strong economic growth. Not only is China putting new 

transformers into use, they are also replacing older transformers to improve grid reliability. 

China is seeking higher efficiency, grain oriented steels to reduce energy losses. Construction of 

a highly efficient grid will offset some of China's need for generation capacity. This continual 

high level of demand in China offset some of the downward pressures on electrical steel prices 

during the global recession.

Steel consumption has also increased rapidly in India since 2003, when consumption 

increased about 70 percent.14 The World Steel Association forecasts that steel demand in India 

will increase to nearly 72 million tonnes of finished steel product by 2011 making India the third 

largest consumer.15

3A.1.6 Core Steel Manufacturer Input Prices

A shortage of raw materials for making steel, particularly iron ore, is contributing to the 

price increases. Production of iron ore fell in 2009 for the first time in seven years due to the 

global recession. However, prices remained high due to record level trading, which was up 7.4

percent from the previous year. The increase in trading was the result of higher Chinese imports, 

driven by growing demand, combined with a fall in Chinese domestic production.16 China used 

to be the world ́s largest producer of iron ore, but now due to the exhaustion for their domestic 

resources, occupies fourth place after Australia, Brazil, and India.

In 2009, worldwide production of iron ore fell by 6.2 percent to 1.59 billion tons.16 Three 

companies supply approximately 35 percent of the world’s iron ore: Brazil's Companhia Vale do 

Rio Doce SA (CVRD) and the Anglo Australian companies in Australia: Rio Tinto and BHP 

Billiton. In the past, China entered into long term supply contracts with mining companies that 

supply these raw materials to secure sufficient quantities of iron ore for its growing economy. 

However, in 2010 these three suppliers stopped using annual iron ore benchmark prices and 

turned to more flexible index-based pricing, bringing even more volatility to the market.17

Coke is another raw material needed for steel production that is in short supply. Coke is 

used to produce about 66 percent of steel worldwide. Within the U.S., the domestic steel 

depression has caused the closing of many coke production sites. Additionally, U.S. exports of 

coke have increased, as nearly two thirds of all U.S. coking coal was exported in 2009. China, a 

large producer of coke, has decided to keep much of this material within its borders, while also 

increasing imports to meet its growing steel production demand. China imported 34 million 

tonnes of coking coal in 2009, which is almost a fivefold increase over 2008.18 These factors 

have contributed to a rise in coke prices from $129 per ton in 2009 to over $200 per ton in 

2010.19

An alternative method to using iron ore and coke to fabricate steel is the use of steel 

scrap. However, in recent years the availability of steel scrap in the United States has 
3A-7

continually declined. Despite a worldwide decline in steel production, U.S. scrap exports 

continued to increase, and in 2009, the United States exported nearly one-third of all the scrap it 

produced. Scrap exports in 2009 were 46.7 percent of domestic scrap consumption, compared to 

only 32.6 percent in 2008, and less than 20 percent in 2005. 

China is the overwhelming beneficiary of the increase, as U.S. scrap exports to China 

have more than doubled, even though both U.S. and global steel production fell sharply. Scrap 

prices peaked in the middle of 2008, before falling sharply. However, by December 2008 the 

price began to rise and has continued to move sharply upwards through 2010. The American 

Metal Market (AMM) price for shredded auto scrap in March 2010 was $350 per ton, while the 

price for ―#1 busheling‖ was $443.75. Figure 3.1 illustrates the volatility in U.S. scrap prices 

over the past two years.20

Figure 3.1 Average Annual Prices for Grain Oriented Steels in the U.S. ($/lb)

Source: American Metal Market, www.amm.com

These rising raw material prices, in conjunction with high energy prices, have caused 

large U.S. steel producers to place surcharges on core steel. U.S. electrical steel manufacturers 

say these surcharges are needed to protect against raw material and energy cost fluctuations. 

Table 3.2 presents the January 2009–October 2010 electrical steel surcharges implemented by 

Allegheny Ludlum and AK Steel. Each month these surcharges are adjusted based on the prices 

of raw materials and energy used to manufacture the products.
3A-8

Table 3.2 Alloy Surcharge for Electrical Steels (US$/ton)

2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 

Allegheny 

Ludlum 207 321 299 227 205 156 168 181 245 266 268 288

AK Steel 10 165 165 100 55 10 70 75 170 185 210 185

2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct 

Allegheny 

Ludlum 279 309 385 391 446 462 485 469 458 433

AK Steel 155 235 325 330 420 435 395 385 350 350

Source: AK Steel and Allegheny Ludlum press releases.

These surcharges decreased severely in 2009 due to the global economic crisis, but have 

increased in 2010 due to greater market activity and higher raw material prices.

3A.1.7 Value of the U.S. Dollar

The value of the U.S. dollar has dropped in recent years against other currencies, 

affecting the U.S. core steel market. As the value of the dollar declines, the cost of imported 

core steel paid by domestic transformer manufacturers increases. The cost of raw materials, 

particularly scrap, to domestic steel manufacturers also increases, creating higher steel prices. 

Conversely, core steel produced in the U.S. becomes an attractive export, since its cost to foreign 

consumers is lower. These factors drive up core steel prices paid by U.S. transformer 

manufacturers.

Table 3.3 illustrates the decrease in value of the U.S. dollar between 2009 and 2010. The 

currency conversion rates are provided with those of several other countries.

Table 3.3 Selected International Currency Rates per U.S. Dollar

1 Unit / USD 

Currency Average 2009 Average 2010 

(to date 9/13/10)

Percent Change

[%]

Euro 0.719 0.762 6.0

Chinese Yuan 6.841 6.822 -0.3

Japanese Yen 93.617 89.918 -4.0

Indian Rupee 48.850 46.158 -5.5

Russian Rouble 31.815 30.288 -4.8

Canadian Dollar 1.142 0.654 -43.0

South Korean Won 1279.077 1168.795 -8.6

British Pound 0.641 0.654 1.9

Source: The OANDA online historical exchange rates, http://www.oanda.com/currency/historical-rates.
3A-9

3A.1.8 Global Economic Recession

The U.S. recession began in December of 2007 and had profound impacts on the entire 

global economy through 2009. In 2008, real demand for core steel was shrinking. However, 

global steel prices were increasing rapidly as a result of volatile input costs and higher energy 

and transport charges. Due to the rising price, companies were only purchasing for their 

immediate requirements and producers were keeping inventory levels at a minimum, which 

significantly reduced the demand for steel products, such as core steel.21 In October of 2008 the 

weakening economies of the U.S. and the European Union (EU) had sufficiently halted demand 

for steel causing the global price of steel to plummet.22

The global crisis had badly affected export business and major steel companies made 

significant cuts in production to try to stabilize the situation. The global financial crisis pushed 

the world steel industry into recession, as the demand for steel contracted sharply, particularly in 

North America, Europe and Japan. Steelmakers introduced major production cuts, reducing 

output to nearly 40 percent of capacity. These combined effects caused the global steel price to 

decline in late 2008 through 2009.23 Still, other companies like Angang Steel and ArcelorMittal 

were developing facilities for expanded electrical steel production, which would further expand 

the gap between supply and demand.

3A.3 U.S. ELECTRICAL STEEL PRICING

3A.1.9 U.S. Electrical Steel Producers

AK Steel

AK Steel’s annual report gives insight into the outlook of the domestic steel market. AK 

Steel expected that the lower selling prices experienced during 2009 would continue through 

2010 and the foreseeable future. While prices could increase above the 2009 levels, it seemed 

unlikely that prices would return to their 2008 levels. AK Steel continued to apply surcharges to 

steel prices to mitigate the impacts of fluctuating raw material and energy costs. While AK Steel 

previously made many long-term contracts with fixed selling prices, over 80 percent of current 

contracts now implement price surcharges.

AK Steel noted that many domestic and foreign steel manufacturers were increasing their 

production capacity and expected sales to the United States. In particular, Chinese steel 

manufacturers have increased production capacity in recent years. As a result, the global price of 

steel could decline if supply outpaces demand, though steel manufacturers generally expect 

higher demand than 2009 levels.24

Allegheny Ludlum

Allegheny Ludlum expressed a strategic focus on high value specialty steels like grain 

oriented electrical steel. During 2009, sales of high value steels represented 61 percent of its 

total sales compared to 42 percent of sales in 2002. Similar to AK Steel, Allegheny Ludlum 
3A-10

mitigated variable material prices by releasing monthly surcharges for the price of electrical 

steel.25

3A.1.10 Steel Pricing

Since demand exceeded supply in late 2003, steel prices, including grain oriented 

electrical steel, started to increase. In 2005, prices of other types of steel started to decrease, but 

those of grain oriented electrical steels did not. Prices continued to increase through 2008, when 

they fell sharply as a result of the global economic recession. This reduction in core steel prices 

was somewhat offset by increasing demand from China and India. Prices began to stabilize in 

2010, but were not expected to increase to the 2008 levels in the near future. 

It is important to note that, while made from the same raw materials, the prices of 

electrical steel do not necessarily follow general steel market trends.

3A.1.11 U.S. Electrical Steel Pricing

DOE contracted Optimized Program Service, Inc. (OPS) to develop material price 

estimates for the engineering analysis. OPS used data from their own records as well as data 

provided by transformer manufacturers and material suppliers and wholesalers. Although not all 

U.S. transformer manufacturers pay the same amount per pound for electrical-grade steels due to 

varied contract negotiations, these prices are intended to be representative of a standard quantity 

order for a medium to large scale U.S. transformer manufacturer. DOE then refined these price 

estimates through conversations with transformer manufacturers in 2010. Figure 3.2 illustrates 

the five-year price trend for grain oriented steels.
3A-11

Figure 3.2 Average Annual Prices for Grain-Oriented Steels in the US (2010$/lb)

The engineering analysis also examined three types of specialty electrical steels: ZDMH, 

SA1, and H-O DR. ZDMH—mechanically scribed, deep domain-refined core steel—is a 

patented product manufactured by Nippon Steel Corporation in Japan. The domain refinement is 

able to survive the annealing furnace; therefore, this steel is used for highly efficient wound 

cores. SA1, Metglasbamorphous material, is highly efficient and is also used in wound-core 

configurations. H-O DR, the most efficient steel used in stacked core configurations, is 

manufactured domestically by AK Steel. H-O DR undergoes a laser scribing process that 

decreases the losses associated with the steel by as much as 10 percent.26 Figure 3.3 illustrates 

the historical price trends of these steels from 2006 to 2010. Note that the amorphous material 

(SA1) represents the cost per pound of a finished core, while the other two steels represent the 

raw material price. Additionally, DOE only considered the amorphous price from 2008 to 2010 

because this is when North American amorphous core manufacturers began production. DOE 

believes the price of core production by foreign manufacturers prior to 2008 is no longer 

representative of the current price for amorphous cores in North America.

 

b Registered trademark of Metglas, Inc., a wholly owned subsidiary of Hitachi Metals, Ltd., Tokyo, Japan.

$-

$0.50 

$1.00 

$1.50 

$2.00 

$2.50 

2006 2007 2008 2009 2010

Price ($/lb)

Year

M6

M5

M4

M3

M2
3A-12

Figure 3.3 Average Annual Prices for Specialty Steels in the US (2010$/lb, note: SA1 is 

finished core)

3A.1.12 Amorphous Core Material

Amorphous core material has been in existence for more than 35 years. Hitachi Metals is 

the only global supplier of the material. While Hitachi Metals is based in Japan, it also has a 

facility in the United States where amorphous metal is produced. Hitachi sells the material in the 

United States through a wholly-owned subsidiary called Metglas®. This U.S. facility currently 

has three production lines, and can produce approximately 41,000 tonnes of amorphous steel per 

year. The Hitachi facility in Japan has two production lines, and can produce 30,000 tonnes per 

year. However, Hitachi is upgrading its Japanese facility to add two additional production lines, 

which will bring its capacity to 100,000 tonnes per year. This facility upgrade is expected to 

finish in 2010, and will bring Hitachi’s total amorphous capacity to 141,000 tonnes.

In addition to Hitachi Metals, one other supplier is known to be producing amorphous 

metal commercially. A company based in China called Advanced Technology & Materials 

(AT&M) has production capacity of 40,000 tonnes per year.27 This company is not considered a 

global supplier, however, because it is not known to supply amorphous metal outside the Chinese 

market. Several other companies have attempted to produce amorphous metal in recent years, 

but none are known to be supplying the marketplace.

Therefore, the current total global capacity for amorphous metal is 181,000 tonnes per 

year, of which 40,000 tonnes are exclusively available to the Chinese marketplace. The 

$-

$0.50 

$1.00 

$1.50 

$2.00 

$2.50 

$3.00 

$3.50 

2006 2007 2008 2009 2010

Price ($/lb)

Year

H-0 DR

ZDMH

SA1 Amorphous
3A-13

remaining 141,000 tonnes are sold in the global marketplace. Compared to the 2.5M tonnes of 

grain-oriented electrical steel produced in 2009, amorphous metal constitutes less than six

percent of the global supply for electrical steel.

3A.1.13 Material Price Sensitivity Analysis

DOE considered material prices from 2006-2010 (in constant 2010$) in its analysis, and 

used the 2010 material prices as the reference case for its analysis. Many manufacturers and 

suppliers of core steel indicated that the 2010 price was indicative of the expected material prices 

for the next several years. They did not expect material prices to rise back to the highs seen in 

2008 for the near future, and identified 2008 as a maximum material price scenario. DOE 

examined a material price sensitivity based on 2008 prices and 2006 prices as the high price and 

low price scenarios, respectively. Detail on these sensitivities and the specific material prices 

can be found in appendix 5C.

3A.4 ELECTRICAL STEEL MANUFACTURER PROFILES

3A.1.14 AK Steel

AK Steel, founded in 1899 and headquartered in Middletown, Ohio, employs more than 

6,200 people in Ohio, Kentucky, Indiana, and Pennsylvania.28 With $4.1 billion in sales, the 

company produces flat rolled carbon, stainless, and electrical steel products. AK Steel produces 

a range of electrical steels, including oriented steel grades of M2, M3, M4, M5, and M6, nonoriented standard steel grades of M15 to M47, and domain-refined, laser scribed steels, H-O DR, 

H-1 DR, and H-2 DR. In 2009, AK Steel produced 312,000 tonnes of grain oriented electrical 

steel.1

3A.1.15 Allegheny Ludlum

Allegheny Ludlum Corporation, headquartered in Pittsburgh, PA operates specialty 

metals manufacturing facilities in Pennsylvania, Connecticut, Massachusetts, Indiana, and Ohio. 

In 2009, Allegheny Ludlum had revenue of approximately $3.1 billion. In addition to its other 

stainless and specialty steel products, it produces grain oriented steel with grades from M2 to 

M6. In 2009, Allegheny Ludlum produced 109,000 tonnes of grain oriented electrical steel.1

3A.1.16 Nippon Steel Corporation

In 1970, Yawata Iron and Steel and Fuji Steel merged to form Nippon Steel Corporation. 

Located in Tokyo, Japan, Nippon Steel has about 15,500 employees and produces over 28 

million metric tons of crude steel annually. Nippon produces grain oriented steel with grades 

from M2 to M6 and non-oriented standard steel grades of M15 to M45. In 2009, Nippon Steel 

produced 243,000 tonnes of grain oriented electrical steel.1
3A-14

In 2009, 20 percent of Nippon Steel's exports went to China, while 60 percent were 

distributed among other Asian regions, 5 percent to North America, 4 percent to South America, 

and 2 percent to Europe. The remaining 9 percent were disbursed between Africa, the Middle 

East, and Oceania.29

3A.1.17 JFE Steel Corporation

Another Japanese company, JFE Steel Corporation, was formed in December 2001 from 

a merger between Kawasaki Steel and NKK Corporation. It produced a total of 29.3 million 

tonnes of crude steel in 2008. JFE Steel produces several types (each with several grades) of 

grain oriented electrical steel and non-oriented electrical steel. In 2009, JFE Steel Corporation 

produced 160,000 tonnes of grain oriented electrical steel.1

3A.1.18 Novolipetsk Metallurgical Plant

Novolipetsk Steel (NLMK) started in 1931 when iron ore and limestone deposits were 

discovered in Lipetsk, Russia. NLMK is now the largest steel sheet producer in Russia. In 2006 

it acquired Viz Stal Metallurgical Plant, which was the largest producer of grain oriented steel 

and the second largest electrical steel producer in Russia.30

NLMK’s share of global grain oriented electrical steel production is nearly 11 percent 

and over 80 percent of its products are exported. In 2007, it produced 189,000 tonnes of grain 

oriented steel and 19,000 tonnes of non-grain oriented steel.31 In total, NLMK has a production 

capacity of 9.4 million metric tonnes of crude steel annually. NLMK’s total transformer steel 

production capacity is approximately 350,000 tonnes annually.32 In 2009, NLMK produced 

344,000 tonnes of grain oriented electrical steel.1

3A.1.19 Tata Steel (Cogent Power Ltd.)

Tata Steel is the world’s tenth largest steel producer, with a crude steel capacity of over 

28 million tonnes. In April 2007, Tata Steel acquired Corus, an international metal company that 

provides electrical steel through its wholly-owned subsidiary, Cogent Power Ltd.33 The 

electrical steel division of Cogent Power is comprised of Orb Works, located in South Wales, 

and Surahammars Bruk, headquartered in Sweden. Orb Works and Surahammars both produce 

a wide variety of both grain oriented and non-oriented steels. In 2009, Orb produced 90,000 

tonnes of grain oriented electrical steel.1

3A.1.20 ThyssenKrupp Steel

ThyssenKrupp Steel, a subsidiary of ThyssenKrupp AG, entered the electrical steel 

market in 1989. In 2002 ThyssenKrupp Electrical Steel (TKES) was formed to consolidate all of 

the company's electrical steel activities. Further restructuring in 2004 created ThyssenKrupp 

Stahl AG to handle the company's non-oriented electrical steel products. TKES now deals solely 

with grain oriented steels. TKES is headquartered in Essen, Germany and has plants in 
3A-15

Germany, India, Deutschland, Italy and France. ThyssenKrupp has a production capacity of 

approximately 1.5 million tonnes of electrical steel annually, making it the largest electrical steel 

producer in Europe and the third largest producer worldwide.34 In 2009, TKES produced 

250,000 tonnes of grain oriented electrical steel.1

3A.1.21 China Steel Corporation

China Steel Corporation, the only integrated steel producer in Taiwan, was founded in 

1971 and exports approximately 25 percent of its steel production volume. It currently has a 

crude steel production capacity of approximately 7.8 million tonnes and produces four grades of 

electrical steel.35 China Steel Corporation does not produce grain oriented electrical steel.

3A.1.22 Pohang Iron and Steel (POSCO)

POSCO, located in the port city of Pohang, South Korea, was founded in 1958, produces 

30 million tonnes of steel annually, and has nearly 30,000 employees. In 2009, POSCO had 

about one million tonnes of electrical steel capacity annually.36 POSCO is considering 

partnering with Steel Authority of India Limited (SAIL) to build a production complex with a 

proposed annual capacity of about 3 million tonnes.37 In 2009, POSCO produced 250,000 

tonnes of grain oriented electrical steel.1

3A.1.23 Shanghai Baosteel Group Corporation

Shanghai Baosteel, formerly Baoshan Iron & Steel, is state owned and China's largest 

iron and steel maker. Baosteel and its 22 wholly-owned subsidiaries have an annual production 

capacity of around 30 million metric tonnes of crude steel and 600,000 tonnes of electrical steel. 

In 2009, it produced 90,000 tonnes of grain oriented electrical steel.1

3A.1.24 Wuhan Iron and Steel Company

Wuhan (WISCO), a Chinese company, produced 30 million metric tonnes of crude steel 

in 2009, and increased its annual electrical steel capacity to 2 million metric tonnes in 2010 with 

the completion of three new production lines. Currently, more than half of domestic silicon steel 

demand in China is met by WISCO.38 In 2009, WISCO produced 440,000 tonnes of grain 

oriented electrical steel, making it the largest producer of grain oriented steel.1

3A.1.25 ArcelorMittal

ArcelorMittal, a Brazilian company, was founded in 1944 and in 2009 produced a total of 

73 million tonnes of crude steel, representing approximately 8 percent of world steel output.39 

ArcelorMittal offers both grain oriented and non-oriented electrical steel. In 2010, ArcelorMittal 

proposed a 50-50 joint venture with SAIL to set up a steel facility in Bokaro, India.37 

Additionally, in 2008 ArcelorMittal entered into a joint venture with Hunan Valin Steel Group to 
3A-16

build a steel facility in China with a projected annual capacity of 200,000 tonnes of grain 

oriented steel.8 In 2009, ArcelorMittal produced 107,000 tonnes of grain oriented electrical 

steel.1

3A.1.26 Stalprodukt S.A.

In 1992, the Polish company Stalprodukt S.A. purchased two former Sendzimir Steel 

Works production plants. Stalprodukt S.A. produces four grades of grain oriented electrical 

steels. In 2009, Stalprodukt S.A. produced 62,000 tonnes of grain oriented electrical steel.1

3A.1.27 Angang Steel

Angang Steel, located in China, was incorporated in 1997 with Anshan Iron and Steel 

Group Complex as its sole promoter. It produces a wide array of steel products, and is building 

facilities for grain oriented steel production. The facilities are expected to start production at the 

end of 2010, and will have the capacity to produce 300,000 tonnes of grain oriented electrical 

steel annually.7
3A-17

 

1 Wupperman, Dr. Carl-Dieter. ―Prospective Development of a Challenging Product of the Steel Industry.‖ The 4th 

International Workshop on Magnetism and Metallurgy. June 9-11, 2010.

2 U.S. Department of Commerce - International Trade Administration, Global Steel Trade: Structural Problems and 

Future Solutions, Chapter 2: The U.S. Steel Import Crisis, 2000, Washington D.C.

3 Association for Iron & Steel Technology. Steel Industry Bankruptcies: Bankruptcy filings and other major events, 

1998-2003, 2003. (Last accessed August 8, 2005.) <http://www.steelnews.org/companies/steel_bankruptcies.htm>. 

This material is available in Docket # 83. Contact Ms. Brenda Edwards-Jones, U.S. Department of Energy, Building 

Technologies Program, Mailstop EE-2J, 1000 Independence Avenue, SW, Washington, DC, 20585-0121, telephone 

(202) 586-2945 for more information.

4 MEPS. Steel Capacity Utilisation Starting to Rise, 2009. (Last accessed September 16, 2010.) 

<http://www.meps.co.uk/steelcapacitynews.htm>.

5 AK Steel website, 2010. (Last accessed September 17, 2010.) <www.aksteel.com>.

6 Allegheny Ludlum website, 2010. (Last accessed September 17, 2010.) <www.alleghenyludlum.com>.

7

SteelOrbis. Steelmaking in Anshan city focuses increasingly on high added-value products. July 26, 2010. (Last 

accessed on November 6, 2010). http://www.steelorbis.com/steel-news/latest-news/steelmaking-in-anshan-cityfocuses-increasingly-on-high-added_value-products-545834.htm.

8 ArcelorMittal Website. ―Valin and ArcelorMittal Sign Electrical Steel JV Agreement.‖ August 13, 2008. (Last 

accessed on November 6, 2010). http://www.arcelormittal.com/index.php?lang=en&page=49&tb0=331&tblng=1.

9

SteelOrbis. NLMK Denies grain-oriented electrical steel dumping in China, 2009. (Last Accessed on September 

17, 2010.) <http://news.alibaba.com/article/detail/metalworking/100217943-1-nlmk-denies-grain-oriented-electricalsteel.html>.

10 Specialty Steel Industry of North America. SSINA Releases Market Data For December 2009 Market Data, 2010. 

(Last accessed on September 17, 2010.) <http://www.ssina.com/news/releases/pdf_releases/20100324.pdf >.

11 U.S. Department of Commerce - International Trade Administration, U.S. Exports of Steel Mill Products for 

Sheets and Strip-Electrical 2002-2010, 2010. (Last accessed on September 17, 2010.) 

<http://ia.ita.doc.gov/steel/license/SMP/Exports/ANNUAL/MMTSum_CELE_9Y.htm >.

12 CIA – The World Factbook, Country Comparison to the World - GPD Real Growth Rate, 2009. (Last accessed on 

September 17, 2010.) <https://www.cia.gov/library/publications/the-world-factbook/fields/2003.html>.

13 China Daily, China’s Steel Consumption Not to Peak Before 2010, 2004. (Last accessed August 8, 2005.) 

<http://www2.chinadaily.com.cn/en/doc/2004-01/25/content_300957.htm>. This material is available in Docket # 

83. Contact Ms. Brenda Edwards-Jones, U.S. Department of Energy, Building Technologies Program, Mailstop EE2J, 1000 Independence Avenue, SW, Washington, DC, 20585-0121, telephone (202) 586-2945 for more 

information.

14 World Steel Association, World Steel in Figures 2010, 2010. (Last accessed on September 17, 2010.) 

<http://www.worldsteel.org/pictures/publicationfiles/WSIF2010.pdf>.
3A-18

 

15 The Economic Times, India, China drive growth in global steel consumption, 2010 (Last accessed on September 

17, 2010.) <http://economictimes.indiatimes.com/articleshow/5982923.cms?prtpage=1>.

16 United Nations Conference on Trade and Development. Production of iron ore fell in 2009, but shipments 

continued to increase, report says, 2010. (Last accessed on September 20, 2010.) 

<http://www.unctad.org/templates/webflyer.asp?docid=13721&intItemID=1528&lang=1>.

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20, 2010.) < http://www.chinamining.org/Specials/2010_Iron_Ore_Prices_Talks/2010-09-

06/1283755777d38914.html>.

18 Australian Bureau of Agricultural and Resource Economics, FACTBOX-Role of coking coal in global steel 

production, 2010. (Last accessed on September 20, 2010.) 

<http://in.reuters.com/assets/print?aid=INSGE6270A720100308>.

19 Lassahn, Jeff. Massey drove up production prior to West Virginia mine disaster, 2010. (Last accessed on 

September 20, 2010.) <http://www.wsws.org/articles/2010/apr2010/coal-a17.shtml>.

20 American Scrap Coalition, Developments in Steel Scrap in 2009, 2009. (Last accessed on September 23, 2010.) 

<http://www.wileyrein.com/resources/documents/Scrap_Memo-.pdf>.

21 MEPS, Record Hike for U.S. Steel Prices, 2008. (Last accessed on September 21, 2010.) 

<http://www.meps.co.uk/viewpoint4-08.htm>.

22 MEPS, Global Steel Prices in Free Fall – Further Reductions Anticipated, 2008. (Last accessed on September 21, 

2010.) <http://www.meps.co.uk/viewpoint4-08.htm>.

23 Organization for Economic Co-operation and Development, OECD Steel Committee, 2009. (Last accessed on 

September 20, 2010.) <http://www.oecd.org/dataoecd/21/37/43312347.pdf>.

24 AK Steel. Annual Report and Form 10-K 2009. 

http://www.aksteel.com/data/financial_stmts/AK%20Steel%20Annual%20Report%2012-31-2009.pdf.

25 Allegheny Technologies Incorporated. Annual Report 2009. 

http://www.investquest.com/iq/a/ati/fin/annual/09/ati09_ar.pdf.

26 AK Steel, Product Data Bulletin: Oriented and Tran-Cor H Electrical Steels, 2000. (Last accessed on August 8, 

2005.) <http://www.aksteel.com/pdf/markets_products/electrical/Oriented_Bulletin.pdf>. This material is available 

in Docket # 83. Contact Ms. Brenda Edwards-Jones, U.S. Department of Energy, Building Technologies Program, 

Mailstop EE-2J, 1000 Independence Avenue, SW, Washington, DC, 20585-0121, telephone (202) 586-2945 for 

more information.

27 Chu, Christina. ―China’s AT&M Launches Amorphous Metal Ribbon in Conjunction with the Country’s 

Emission Reduction Plan.‖ Asia Energy Platform. September 29, 2009. 

http://aepfm.org/ufiles/pdf/AM%20Ribbon%20Supply%20from%20China.pdf.

28 AK Steel, AK Steel’s Coshocton and Zanesville Plants Recognized for Outstanding Safety Performances, 2010. 

(Last accessed on September 21, 2010.) 

<http://www.aksteel.com/news/press_release.aspx?doc_id=791&year=2010>.

29 Nippon Steel, Export Shipments by Destination. 2010, (Last accessed on September 21, 2010.) 

<http://www.nsc.co.jp/en/company/pdf/nscguide2010_e_075.pdf>.
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30 Novolipetsk Steel, Novolipetsk Steel (NLMK) VIZ Stal Acquisition, 2006. (Last accessed on September 22, 2010.) 

<http://www.nlmksteel.com/upload/Presentations/VIZ%20Transaction%20Presentation%20vF(english).pdf>.

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<http://www.nlmksteel.com/StandardPage____748.aspx>.

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September 22, 2010.) <http://www.rustocks.com/index.phtml/pressreleases/0/108/20191>.

33 Corus Group, About Corus, 2010. (Last accessed on September 22, 2010.) 

<http://www.corusgroup.com/en/company/about_corus/>.

34 ThyssenKrupp Steel, Presentation ThyssenKrupp Steel, 2008. (Last accessed on September 22, 2010.)

35 China Steel Corporation, Operations Report 2009, 2010. (Last accessed on September 22, 2010.) 

<http://www.csc.com.tw/csc_e/ss/98year.htm>.

36 Posco, POSCO Q1 2009 Operating Performance. 2009, (Last accessed on September 22, 2010.) 

<http://www.posco.com/homepage/docs/eng/dn/invest/archive/2009%201Q%20PT%20(Eng).pdf>.

37 The Economic Times, After Posco, ArcelorMittal Seeks to Partner SAIL. April 23, 2010. 

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38 SteelOrbis, WISCO becomes world’s largest production base for silicon steel, 2010. (Last accessed on September 

22, 2010.) <http://www.steelorbis.com/steel-news/latest-news/wisco-becomes-worlds-largest-production-base-forsilicon-steel-534893.htm>.

39 ArcelorMittal, ArcelorMittal announces publication of its Half-Year Report 2010, 2010. (Last accessed on 

September 23, 2010.) <http://www.arcelormittal.com/index.php?lang=en&page=49&tb0=418&tblng=1>.