2012 H1 Economics JC2 Prelim

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8819/01/IJC/Sep 12 2 Section A Answer all questions in this section. Question 1 The market for steel Figure 1 Global composite steel price index Note: Global composite steel price is a weighted av erage of the lowest tran sacted cost of all steel products converted into US dollars. 2004 = 100. Source: www.bloomberg.com Extract 1: Global steel market The recent Eurozone sovereign debt crisis has created a lot of uncertainty in the steel market. This uncertain macroeconomic environment – with distressed financial markets and large government budget deficits – has led to countries implementing a number of austerity measures. In fact, ce rtain parts of the world have suspended investment in large-scale infrastructure projects. As a result, steel demand has not rebounded as strongly as predicted. Meanwhile, growth in Chin ese steel production has changed the country from a net steel importer to a net steel exporter. Other emerging economie s, such as South Korea and Taiwan, are also installing newer steel capacities. There is now significant over-capacity in the global steel sector. Source: Global steel outlook 2011 and 2012; Ernst & Young’s Global Mining & Metals Center

8819/01/IJC/Sep 12 3 Extract 2: Environmental aspects of steel production The primary process of steel production fr om iron ore involves three basic steps: First, the heat source used to melt iron ore is produced. Next the iron ore is melted in a furnace. Finally, the molten iron is processed to produce steel. This production of steel from ore is the most energy intensive and emits th e most carbon dio