Steel is a much used alloy consisting mostly of iron. It usually has a carbon content between 0,2% and 2,1% by weight, depending on the grade of the steel. While carbon is the most common material to alloy with iron, various other elements are used: tungsten, vanadium, chromium and manganese. All these elements, including carbon, are used to harden the end-product. By varying the amount of alloying elements and the form of their presence in the steel, qualities like hardness, tensile strength and ductility are controlled.

The use of steel became common after efficient production methods were invented in the 17th century, but it was already produced by various inefficient methods long before that. In the 19th century the invention of the Bessemer process made it possible for steel to become an inexpensive material which could be mass-produced. Steel is now one of the most common materials in the world as a major component in buildings, infrastructure, ships, cars, machines, weapons, appliances and tools.



In antiquity steel may already have been produced by using bloomeries, iron-smelting facilities with carbon contained in the bloom. The earliest know production of steel is about 4,000 years old and is excavated from an archaeological site in Anatolia. Other uses of ancient steel originates from East Africa (1400 BC), the Iberian Peninsula and Rome (300 BC), China (400 BC) and India (400 BC).
The earliest evidence of the production of high carbon steel was found in the Indian subcontinent in Sri Lanka. The so-called Wootz steel was produced in India around 300 BC and imported by the Chinese not long after. This early steel uniquely used a wind furnace, which, blown by the monsoon winds, could reach temperatures high enough to produce high-carbon steel. Also known as Damascus steel, Wootz is famous for its durability and the ability to hold a sharp edge.


The Making of Steel

The making of Steel is a process which involves a number of steps.


Making Pig Iron

Ninety percent of all the mining of metallic ores in the world is for the extraction of iron, which is the 4th most abundant element in the earth. The ores hematite (Fe2O3) and magnetite (Fe2O4) are mainly used in a reaction with carbon to reduce the amount of oxide present.



The first step in steel production is the smelting of iron ore into pig iron in a blast furnace. This step is largely unchanged since the 17th century. Charcoal was used in that time, but more modern methods use coke, which has proven to be a lot cheaper. In the blast furnace, the iron ore and carbon (coke) are heated to a temperature of around 2000 degrees Celsius (3600 degrees Fahrenheit). Lime is also added to remove some impurities. The oxygen present in the furnace reacts with the carbon and produces carbon monoxide:

2 C + O2 -> 2 CO

The carbon monoxide in turn reduces the iron ore to molten iron:

Fe2O3 + 3 CO -> 2 Fe + 3 CO2

What exits the blast furnace is called pig iron and is carbon-rich.


Basic Oxygen Steelmaking

In a process called basic oxygen steelmaking, the steel is wrought from pig iron. The process is comprised of a number of steps.
First, the molten pig iron is poured into an industrial ladle. The ladle is either sent directly for the steelmaking process, but is usually treated to reduce sulfur, phosphorus and silicon contents. Sulfur is reduced by lancing powdered magnesium into the molten iron. The magnesium reacts with the sulfur to create magnesium sulfide, which is removed from the ladle. The silicon and phosphorus are reduced using lime.
Second, the molten pig iron is poured into a furnace with around one-fifth of scrap steel in carefully balanced ratios. A water-cooled lance is lowered into the furnace, which starts to blow almost pure oxygen at velocities faster than Mach 1. The oxygen ignites the carbon present and burns it to create carbon dioxide and carbon monoxide. This causes the temperature to rise to around 1700 degrees Celsius (3000 degrees Fahrenheit), which melts the steel scrap, removes unwanted elements and lowers the carbon content in the molten mass. Additional fluxes are added and forms slag, which absorbs the impurities of the process.
Third, the furnace is tilted and the steel is poured into a container. The basic steel is refined in a second furnace, where it is alloyed to give it special properties required by the customer. The steel now contains between 0,1% and 1% carbon and can be delivered in the form the customer needs.



Steel is being used in a number of different applications, which are listed below.



Before the process of producing steel was made efficient in the 17th century, steel was expensive and was only used where no cheaper material could be used. Hard, sharp-edged materials like swords were made from steel, as well as springs for clockwork.


Long Steel

Long steel is used as reinforcing bars and grid mesh in reinforced concrete and as a structural building block in modern buildings, bridges and railroad tracks. It is usually shaped in specific beam cross-sections, such as I-beams or T-shaped beams.


Flat Carbon Steel

Flat carbon steel is used for bodies of cars, trains and ships as well as appliances. In the last few decades, plastics or carbon fiber have replaced some of the bodywork usually done with steel. Plastics are used as a low-cost, low-weight solution and carbon fiber usually for low-weight, high strength solutions such as Formula One racing.


Stainless Steel

Stainless steel is used in markets where frequent use by human hands can cause corrosion and wear on normal steel. Wrist watches, cutlery and surgical instruments are made from stainless steel, partly to make the item long-lasting, but also to reduce skin exposure to materials that may contaminate surgical procedures.



Steel trading takes place on the London Metal Exchange (LME). This exchange regulates futures trading in various metals including the Steel Billet futures contract.


Price Factors

The price of steel is influenced by a number of factors. The first indicator is the industrial demand for steel, which is comprised of three major aspects: construction, MFG and the auto industry. These industries are commonly in correlation with economic growth. An expanding economy will have a rising demand for steel in order to support its growth. Rising economies such as China and India are therefore a strong indicator for future steel demands.
Freighting costs can have a major impact on the overall price of steel as the production locations and final consumer locations are in many cases separated by great distances. When these costs rise the price of steel will rise accordingly.
The correlation between oil and steel is very strong. As economic stability is a requirement for a strong demand for steel, the oil prices can indicate possible price movements. In the past, price drops in oil have been generally followed by an economic decline which in many cases will indicate a decline in demand for steel.


LME Steel Billet Futures Contract

A Steel Billet Futures Contract on the London Metal Exchange(LME) has the following specifications:

Product Symbol FM
Contract Size 65 tonnes
Price Quotation US dollars per tonne
Contract Months Monthly: 7 out to 15 months
Tick Size $0.10 US dollars