6 ms·

Raw materials costs are mostly based on scarcity, not salaries. If it weren't, steel would cost more that gold because it goes through more processing.

adrianN 2y ago
Scarcity means that you require more work to mine the same amount of material.
- ivell 2y ago
  There is also economies of scale. Steel is much more useful than gold. This means investments on improving mining and processing will lower the costs in the long run.
  - wqaatwt 2y ago
    Is processing and manufacturing steel actually cheaper than gold at any scale? Gold is a very easy metal to work with. While iron into steel especially on a large scale isn’t trivial. I doubt the cost of labor has a meaningful impact on the price of gold.
- wqaatwt 2y ago
  I’m not sure that’s necessarily true (or at all relevant) for a lot of precious or rate materials like gold. I don’t really know but I’d bet that gold requires much, much less labor to process than steel. It’s just much more scarce so the people who own the mines can charge more for it.
  - laurencerowe 2y ago
    Even high grade gold deposits are only around 10g/tonne or 1 part per 100,000 so you have to process a huge amount of material to recover a tiny amount of gold. Total world gold production was just 3000 tonnes in 2023. By contrast a tonne of steel requires about 2 tonnes of iron ore and 0.8 tonnes of coal and 0.1 tonnes of limestone, all bulk minerals dug out of the ground. Total world steel production was 1.9 billion tonnes in 2023.
    - wqaatwt 2y ago
      Yes, I would assume that certainly correct by weight/per kg. I was thinking more about per $ i.e. a gram of gold costs $100 I’m too lazy to look for exact figures but I would bet that labor costs (maybe even combined with energy costs) make up a very small proportion of that. Edit: well I’m kind of wrong: https://www.gold.org/goldhub/gold-focus/2024/05/higher-gold-price-eases-pressure-producer-margins https://www.gold.org/goldhub/gold-focus/2024/05/higher-gold-... Profit margins seem to be about 50-70% currently but historically it was closer to 30% (of course that’s still many times higher than for steel production)
      - laurencerowe 2y ago
        The profitability will depend on the production costs for each mine. Those at the margin set the price. If it stays high long enough new mines will open or too low and unprofitable mines will close. The excess profits earned by those that have easily accessible high quality ore are known as 'resource rents' but eventually they will be fully exploited and have to close. Apparently a great uncle of mine found gold on his family farm in Scotland, but it was never profitable to exploit so saw no benefit from it!

adrianN 2y ago

Scarcity means that you require more work to mine the same amount of material.

ivell 2y ago
There is also economies of scale. Steel is much more useful than gold. This means investments on improving mining and processing will lower the costs in the long run.
- wqaatwt 2y ago
  Is processing and manufacturing steel actually cheaper than gold at any scale? Gold is a very easy metal to work with. While iron into steel especially on a large scale isn’t trivial. I doubt the cost of labor has a meaningful impact on the price of gold.
wqaatwt 2y ago
I’m not sure that’s necessarily true (or at all relevant) for a lot of precious or rate materials like gold. I don’t really know but I’d bet that gold requires much, much less labor to process than steel. It’s just much more scarce so the people who own the mines can charge more for it.
- laurencerowe 2y ago
  Even high grade gold deposits are only around 10g/tonne or 1 part per 100,000 so you have to process a huge amount of material to recover a tiny amount of gold. Total world gold production was just 3000 tonnes in 2023. By contrast a tonne of steel requires about 2 tonnes of iron ore and 0.8 tonnes of coal and 0.1 tonnes of limestone, all bulk minerals dug out of the ground. Total world steel production was 1.9 billion tonnes in 2023.
  - wqaatwt 2y ago
    Yes, I would assume that certainly correct by weight/per kg. I was thinking more about per $ i.e. a gram of gold costs $100 I’m too lazy to look for exact figures but I would bet that labor costs (maybe even combined with energy costs) make up a very small proportion of that. Edit: well I’m kind of wrong: https://www.gold.org/goldhub/gold-focus/2024/05/higher-gold-price-eases-pressure-producer-margins https://www.gold.org/goldhub/gold-focus/2024/05/higher-gold-... Profit margins seem to be about 50-70% currently but historically it was closer to 30% (of course that’s still many times higher than for steel production)
    - laurencerowe 2y ago
      The profitability will depend on the production costs for each mine. Those at the margin set the price. If it stays high long enough new mines will open or too low and unprofitable mines will close. The excess profits earned by those that have easily accessible high quality ore are known as 'resource rents' but eventually they will be fully exploited and have to close. Apparently a great uncle of mine found gold on his family farm in Scotland, but it was never profitable to exploit so saw no benefit from it!