3A-i 

APPENDIX 3A. CORE STEEL MARKET ANALYSIS

TABLE OF CONTENTS

3A.1 OVERVIEW ............................................................................................................2

3A.1.1 Overall 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 ..............................................................................5

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

3A.1.5 Asian Steel Consumption .............................................................................6

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

3A.1.7 Value of the U.S. Dollar ...............................................................................9

3A.1.8 Global Economic Recession .......................................................................10

3A.3 U.S. ELECTRICAL STEEL PRICING .................................................................10

3A.1.9 U.S. Electrical Steel Producers ..................................................................10

3A.1.10 Steel Pricing ...............................................................................................11

3A.1.11 U.S. Electrical Steel Pricing.......................................................................11

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 .....................................................................................14

3A.1.16 Nippon Steel Corporation ..........................................................................14

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

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

3A.1.19 Hitachi Metglas ..........................................................................................15

3A.1.20 Tata Steel (Cogent Power Ltd.) .................................................................15

3A.1.21 ThyssenKrupp Steel ...................................................................................15

3A.1.22 China Steel Corporation (CSC) .................................................................15

3A.1.23 Pohang Iron and Steel (POSCO)................................................................15

3A.1.24 Shanghai Baosteel Group Corporation ......................................................16

3A.1.25 Wuhan Iron and Steel Company ................................................................16

3A.1.26 ArcelorMittal..............................................................................................16

3A.1.27 Stalprodukt S.A. .........................................................................................16

3A.1.28 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) ................................................ 9

Table 3.3 Selected International Currency Rates per U.S. Dollar ..................................... 9
3A-ii

LIST OF FIGURES

Figure 3.1 Average Annual Prices for Grain Oriented Steels in the U.S. ($/lb) ................ 8

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. 

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. 

For the current rulemaking on distribution transformers, manufacturers commented 

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

availability remain a major concern in the industry. 

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

detail. 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 manufacturers. Additionally, during the stakeholder negotiations, several 

stakeholders offered valuable data and insight into the market to help redress these issues. 

Nearly all manufacturers in all three superclasses indicated that higher standard levels 

would likely result in greater demand for higher grades of core steel, some of 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 OVERVIEW

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. 

According to the World Steel Association, about 8.7 million metric tons (“tonnes”) of electrical 

steel were produced globally in 20091, Estimates from experts in the steel industry suggest that, 

of the total electrical steel production in 2009, 2.5 million tonnes were for grain oriented 

electrical steel.2 It is a highly specialized niche market product that is essential for the 

production of distribution transformers. 

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

Extreme volatility has characterized the U.S. steel market 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.3

3

 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.4 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.

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 2009.5

 In 2010, the price of steel began to recover. However, it was 

more a reflection of the continually increasing cost of material inputs, such as iron ore and 
3A-3 

coking coal, than a definite market recovery. Then again, in 2011, core steel prices fell rather 

dramatically.

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. As DOE understands it, 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 

approximately 6,600 people in Ohio, Kentucky, Indiana, and Pennsylvania. With $6 billion in 

sales in 2010, the company produces flat rolled carbon, stainless, and electrical steel products. 

AK Steel produces a range of electrical steels, including grain oriented steel grades of M2, M3, 

M4, M5 and M6, non-oriented standard steel grades of M15 to M47, high-permeability steels, 

and domain refined, laser scribed steels, H-0 DR, H-1 DR, and H-2 DR.6

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

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

Allegheny Ludlum employs approximately 2,550 people, and in addition to its other stainless 

and specialty steel products, produces grain oriented steel with grades from M2 to M6.7

Hitachi Metglas, headquartered in Tokyo, Japan, is the major global supplier of 

amorphous ribbon. While not owned by a U.S. company, the company operates a U.S. plant in 

Conway, South Carolina, with an annual capacity of more than 40,000 tonnes. Another current 

supplier of amorphous metal is based in China and currently only serves the Chinese market. A 

few other steel producers, including Posco and NEC TOKIN, have announced plans to begin, or 

have recently begun, limited production of amorphous steel. 

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 
3A-4 

companies and their estimated installed capacity for grain oriented electrical steel output are 

listed in Table 3.1. Note that the capacities of these firms significantly depend on the mix of 

steels they produce. All else equal, a production mix weighted towards higher grade steel slows 

throughput relative to lower-grade steels. Therefore, it should not be inferred from the outputs 

listed below that the companies have the ability to produce any grade of steel at that level. Note 

also that all of these companies, except Allegheny Ludlum, also offer non-oriented electrical 

steels.

Table 3.1 Grain Oriented Electrical Steel Key Players

Company Country

Estimated Installed Capacity for 

Grain Oriented Steel (2011-2014)a

Wuhan Iron and Steel Company 

(WISCO) 

[1,000 metric tons]

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

Hitachi Metglas Japan (with U.S. production) 106

Angang Steel China 100

. 

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.8

 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.

 

a Estimates are based on AK Steel’s “Comments on the Global Supply of Grain Oriented Electrical Steels” and 

industry research conducted by DOE.
3A-5 

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.b

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

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

crisis beginning in 2008. 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 198,500 tons in 2009, a 43 percent decrease from the 2008 figure of 345,000.9 

However, from 2009 to 2010, imports of electrical steel rose from 65,600 tonnes to 94,300 

tonnes, indicating nearly a 44 percent increase. This increase indicates the recovery of the steel 

industry from the economic crisis. The U.S. consumption total includes core steel for more 

equipment than simply distribution transformers. 

On the exporting side, the U.S. shipped 212,600 tonnes of electrical grade steel outside its 

borders in 2010, compared to 205,000 tonnes in 2009. In 2006, China and India imported about 

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

50 percent. In 2010, China’s and India’s imports of U.S. electrical steel increased to about 21 

percent while imports in Canada and Mexico decreased to about 32 percent of the total U.S. 

exports of electrical steel.10

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 2011. Since peaking in 2008, prices first fell rapidly in 2009, 

then recovered in 2010, before dropping again in 2011. Several market forces have contributed to 

steel price volatility to varying degrees over this time period. These trends are primarily due to 

five factors:

1. Persistent high global demand for grain oriented electrical steel, particularly in China and 

India; 

2. Generally 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, and, in 

the US market, a sharp decline in new building construction. 

 

b 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-6 

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 grown tremendously. 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. 11

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

of the United States and Japan combined in 2003.12 Since then, between 2004 and 2010, Chinese 

steel consumption more than doubled, further increasing from 276 million tonnes to around 576 

million tonnes, a 109 percent increase.13 Electrical steel is of great importance in China, due to 

the country's increasing energy consumption attendant to its rapid real 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. The persistent growth in Chinese demand offset some of the downward pressures on 

electrical steel prices during the global recession.

Steel consumption has also increased rapidly in India since 2004, during which time 

consumption increased about 72 percent.13 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.14

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.15 China used 

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

resources, it 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.15 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.16
3A-7 

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 2008.17 These factors 

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

2010.18

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 

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.19
3A-8 

Figure 3.1 Price of Steel Scrap in the U.S. ($/Ton) 

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–December 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-9 

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 Nov Dec 

Allegheny 

Ludlum 279 309 385 391 446 462 485 469 458 433 409 384 

AK Steel 155 235 325 330 420 435 395 385 350 350 350 285

2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 

Allegheny 

Ludlum 373 427 485 503 492 515 520 529 532 534 521 508 

AK Steel 290 350 430 400 390 435 440 455 460 460 450 450

Source: AK Steel and Allegheny Ludlum press releases.

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

increased recently 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 2011. 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 2011 Percent Change [%]

Euro 0.719 0.767 6.68%

Chinese Yuan 6.841 6.344 -7.27% 

Japanese Yen 93.617 77.68 -17.02%

Indian Rupee 48.850 54.074 10.69%

Russian Rouble 31.815 31.471 -1.08%

Canadian Dollar 1.142 1.021 -10.60%

South Korean Won 1279.077 1153.46 -9.82% 

British Pound 0.641 0.643 0.31%

Source: The OANDA online historical exchange rates, http://www.oanda.com/currency/historical-rates. 
3A-10

3A.1.8 Global Economic Recession 

The lingering effects of the recent U.S. recession and financial crisis continue to affect 

the electrical steel market. In 2008, real demand for core steel began 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.20 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.21

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

significant cuts in production to try to stabilize the situation. 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 2009.22 Still, other companies like 

Angang Steel were developing facilities for expanded electrical steel production. 

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. In 

2010, AK Steel shipped 5.7 million tons of steel, an increase of 44 percent over 2009 figures.23

Although sales did not fully return to pre-recession levels and the majority of this steel is not 

grain-oriented electrical steel, this overall increase signaled a recovery from the trough of the 

economic cycle. 

AK Steel continues to apply surcharges to steel prices to mitigate the impacts of 

fluctuating raw material and energy costs, and these surcharges were increased in 2010 in order 

to cover higher raw material costs. While AK Steel previously made many long-term contracts 

with fixed selling prices, almost 90 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. 

Allegheny Ludlum

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

oriented electrical steel. During 2010, sales of high value steels represented 70 percent of its 

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

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

steel.24
3A-11

3A.1.10 Steel Pricing

Since demand began increasing relative to 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 then fell again in 2011, in part due to continued weakness in the 

U.S. housing market. 

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 and 2011. Figure 3.2

illustrates the five-year price trend for grain oriented steels.

Figure 3.2 Average Annual Prices for Grain-Oriented Steels in the US (2010$/lb)
3A-12

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

SA1, and H-0 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. However, it has very limited use in the U.S. because of supply limitation. SA1, Metglasc

amorphous material, is highly efficient and is also used in wound-core configurations. H-0 DR

and H-1 DR, the most efficient steels used in stacked core configurations, are manufactured 

domestically by AK Steel. H-0 DR undergoes a laser scribing process that decreases the losses 

associated with the steel by as much as 10 percent.25 Figure 3.3 illustrates the historical price 

trends of these steels from 2006 to 2011. 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. 

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 

currently the only global supplier of the material with significant volume. While Hitachi Metals 

 

c 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 

$3.00 

$3.50 

2006 2007 2008 2009 2010 2011

$/lb

Historical Prices (Specialty)

zdmh

sa1

h0
3A-13

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 

46,000 tonnes of amorphous steel per year. The Hitachi facility in Japan has four production 

lines, and can produce 60,000 tonnes per year. 

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

amount of amorphous metal commercially. A company based in China called Advanced 

Technology & Materials (AT&M) has production capacity of 40,000 tonnes per year, which is 

expected to increase to 100,000 tonnes per year by 2013.26 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, such as Posco and NEC TOKIN, have announced that they 

have begun to pursue commercial production of amorphous steel, but their production capacity is 

still to be determined.

Therefore, the current known total global capacity for commercially available amorphous 

metal is 146,000 tonnes per year, of which 40,000 tonnes are exclusively available to the Chinese 

marketplace. The remaining 106,000 tonnes are sold in the global marketplace. Compared to 

the 2.5 million tonnes of grain-oriented electrical steel produced in 2009, amorphous metal 

constitutes about 4 percent of the global supply for electrical steel.

3A.1.13 Material Price Sensitivity Analysis

DOE considered material prices from 2006-2011 (in constant 2010$) in its analysis, and 

used both 2010 and 2011 material prices as reference cases. Many manufacturers and suppliers 

of core steel indicated that the prices in these years were 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 about 6,600 

people in Ohio, Kentucky, Indiana, and Pennsylvania.27

2

 With $6 billion in sales in 2010, 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-0 DR, 

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

steel.
3A-14

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.2

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 15,800 employees and produces almost 30

million metric tons of crude steel annually.28 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.2

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.2

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, and 

produced over 11 million metric tons of crude steel in 2010.30 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.31

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.32 In 2009, NLMK produced 

344,000 tonnes of grain oriented electrical steel.2 NLMK’s total transformer steel production 

capacity is approximately 350,000 tonnes annually.33 
3A-15

3A.1.19 Hitachi Metglas

Hitachi Metglas, headquartered in Tokyo, Japan, is the major global supplier of 

amorphous ribbon. The company operates a U.S. plant in South Carolina, with an annual 

capacity of more than 40,000 tonnes. 

3A.1.20 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.34 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.2

3A.1.21 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 

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.35

2

 In 2009, TKES produced 

250,000 tonnes of grain oriented electrical steel.

3A.1.22 China Steel Corporation (CSC)

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 an 

annual crude steel production capacity of approximately 13.4 million tonnes and produces four 

grades of electrical steel.36 China Steel Corporation does not produce grain oriented electrical 

steel. CSC is planning to invest $486 million in a new production line for electrical steel which 

would produce 150,000 to 200,000 tonnes of electrical steel annually.37

3A.1.23 Pohang Iron and Steel (POSCO)

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

35 million tonnes of steel in 2010, and has approximately 30,000 employees.38 In 2009, POSCO 

had about one million tonnes of electrical steel capacity annually. 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.39 In 2009, POSCO produced 250,000 
3A-16

tonnes of grain oriented electrical steel.2 In addition, the company approved a plan for 

commercializing amorphous metal production in 2010 and will soon begin production and 

marketing of amorphous metal with plans to produce up to 10 kilotons by 2014. 

3A.1.24 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 tons of crude steel and 600,000 tonnes of electrical steel. In 

2009, it produced 90,000 tonnes of grain oriented electrical steel.2

3A.1.25 Wuhan Iron and Steel Company

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

2009, and increased its annual electrical steel capacity to 2 million metric tons 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.40 In 2009, WISCO produced 440,000 tonnes of grain 

oriented electrical steel, making it the largest producer of grain oriented steel.2

3A.1.26 ArcelorMittal

ArcelorMittal, a Brazilian company, was founded in 1944 and produced a total of 90.6 

million tonnes of crude steel in 2010, representing approximately 8 percent of world steel 

output.41

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. Additionally, in 2008 ArcelorMittal entered into a joint venture with Hunan Valin Steel 

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

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

steel.2

3A.1.27 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.2

3A.1.28 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 began the 

mass production of grain oriented steel at the beginning of 2011. The facilities are expected to 

have the capacity to produce 100,000 tonnes of grain oriented electrical steel annually.42 
3A-17

 

1 World Steel Association, World Steel in Figures 2010, 2010. (Last accessed on August 19, 2011.) 

<http://www.worldsteel.org/pictures/publicationfiles/SSY%202010.pdf>.

2 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.

3 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.

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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.

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

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

6 AK Steel website, 2011. (Last accessed August 15, 2011.) <www.aksteel.com>.

7 Allegheny Ludlum website, 2011. (Last accessed August 15, 2011.) <www.alleghenyludlum.com>.

8 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>.

9 Specialty Steel Industry of North America. SSINA Releases Market Data For December 2010 Market Data, 2011. 

(Last accessed on August 15, 2011.) < http://www.ssina.com/news/releases/pdf_releases/20110324.pdf >.

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Sheets and Strip-Electrical 2003-2010, 2011. (Last accessed on August 15, 2011.) 

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

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12 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.

13 World Steel Association, World Steel in Figures 2011, 2011. (Last accessed on August 15, 2011.) 

<http://www.worldsteel.org/pictures/publicationfiles/WSIF_2011.pdf >.

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

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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>.
3A-18

 

16 China Mining Federation. Minmetals warns of volatility in iron ore pricing, 2010. (Last accessed on September 

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

06/1283755777d38914.html>.

17 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>.

18 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>.

19 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>.

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

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

21 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>.

22 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>.

23 AK Steel. 2010 Annual Report, 2011.(Last accessed August 31, 2011) 

<http://www.aksteel.com/data/financial_stmts/AKS_Form10K_Annual_Report_2010.pdf> 

24 Allegheny Technologies Incorporated. Annual Report 2010, 2011 (Last accessed August 31, 2011). 

<http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9NDE4Nzc4fENoaWxkSUQ9NDMxODcyfFR5cGU9MQ==&t=1> 

25 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.

26 Reuters. China Power Equipment Co-Hosts Industry Conference on Using Amorphous Transformers to Improve 

Rural Power Grid Performance, June 16, 2011. (August 31, 2011)

<http://in.reuters.com/article/2011/06/16/idUS116832+16-Jun-2011+PRN20110616>.

27 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>.

28 Nippon Steel, Annual Report 2010, 2011 (Last accessed August 31, 2011) 

<http://www.nsc.co.jp/en/ir/finance/pdf/anu10_all.pdf> 

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

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30 Novolipetsk Steel, Annual Report 2010, 2011(Last accessed August 31, 2011) 

<http://www.nlmkgroup.com/1TREE/Annual%20Report/AR%202010%20ENG.pdf> 
3A-19

 

31 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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33 RUStocks.com, Press Release – NLMK resumes transformer steel production in Lipetsk, 2009. (Last accessed on 

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

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

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31, 2011.) < http://www.steelorbis.com/steel-news/latest-news/angang-steel-starts-mass-production-ofgrain_oriented-silicon-steel-575981.htm>