The Ferrous Hot Roll Coils downstream market is additional competitive, particularly in the case of galvanized coils and galvanized profile sheets and in particular areas of Cold roll Coils. Still, by keeping a price discrepancy unfavorable to the merchant mills, the incorporated mills can maintain the downstream product prices adequately aggressive captivating the benefit of in-house operations and inferior exchange expenses at their possessed plants. Nonexistence of factors like transportation costs, definite not reusable & non-adjustable taxes, minimized material wastage and to much degree economies of scale, have enabled the integrated firms to compete diligently in the market.
In addition, they have important communal market share and sometimes can play as price setters. Hence, authority over Ferrous Hot Rolled Coils enables the integrated mills powerful in the market for downstream products in addition. HR Coils manufacturers who also produce downstream items like CR Coils and GP/GC sheets etc. preference to differentiating pricing actions keeping little differential between Hot roll coil and Cold Roll Coils or remaining downstream products.
If the price variable between these products is inferior to the costs of alteration of Hot Roll Coils into downstream products for a steel mill, the whole finances of merchant production collapse. This is a widespread and planned pricing strategy adopted usually by integrated mills internationally in robustly competitive conditions to obstruct opposition in their downstream products market. Statistical proof can be perceived in the price development in these products worldwide as well as in third world. This does not seize participation of smaller entities against integrated production for downstream products and in market areas where they can extort greater revenue.
Simon, Matthew. Hot Roll Steel Making & Downstream Products. 2006.