Upstream production refers to the extraction of raw materials for production. Raw material extraction is an integral part to the production of steel. About 70% of steel company costs are related to raw material inputs. These products are mainly iron ore and coal. As a result of the high costs of upstream production, steel companies often integrate the mining process into their production line in order to internalize the costs. Coal is the more important of the two of these commodities. There a many forms of coal that are used, with the market for seaborne coal rapidly becoming the standard practice. The most sought after form of coal in the steel industry, however, is Hard Carbon Coal because its high quality helps keep Blast Furnaces from caving in under extreme heat. The extraction of this product however only exists in 3 areas of the world for the most part, Australia, Western Canada, and the US. The US has a decreasing supply of these materials while Australia and Western Canada control about 65% and 35% respectively. As a result of these extraction costs being so high for steel companies many have turned to the recycling to help alleviate the costs. Currently, about 70% of steel is recycled because it is a simpler and cheaper way of producing steel compared to the constant extraction of coal and iron ore.
Warrian, Peter. A Profile of the Steel Industry: Global Reinvention for a New Economy. New York: Business Expert, LLC, 2012. Print.