RECOVERY IN STAINLESS STEEL PRODUCTION BUT NO BONANZA IN SIGHT

A recovery in the stainless steel sector is underway. World steel production in the second half of this year will be significantly higher than in the first six months. The Asian market has started to pick up. Destocking is coming to an end in most western nations and inventory rebuilding has commenced. We should point out that this revival is from a very low base.

MEPS forecasts global crude stainless steel production at 21.6 million tonnes in 2009. This equates to a 16.7 percent reduction on the previous year's outturn and a 23.5 percent decrease on the peak value in 2007. However, it represents a significant upturn in the fortunes of the industry compared to results in the final quarter of 2008 and the first three months of this year.

Demand on the EU mills has picked up in recent months. Rising nickel costs have prompted end users and distributors to begin to place orders, as stainless steel selling values show signs of further increases. Several regional mills plan to lift output later in the year. We now expect 2009 production to reach 5.7 million tonnes - 27 percent below the 2008 figure.

Japanese output collapsed in the first trimester. We do, however, detect a pick up in consumption from the automotive and IT sectors. The main steelmakers have indicated that they will increase production to meet the requirements of the market over the next few months. The total for this year is not expected to reach the 2 million tonne mark.

Real demand in the United States remains at a low level. However, the local mills have started to claw back market share from importers. This is expected to continue for the remainder of the year. We now expect crude output in 2009 to be 900000 tonnes below the peak figure in 2006.

South Korean activity is likely to remain relatively slow. A modest improvement in production is anticipated in the second half of the year but from an extremely low point in the first quarter. In contrast, the Taiwanese market has picked up as a result of government stimulus measures. The two major producers have increased output. This year’s total should now reach 1.1 million tonnes.

Chinese demand and production rose in the first trimester as the producers lifted their operating rates to near maximum capacity. We believe that oversupply will develop in the coming months and a slowdown in orders will take place. Nevertheless, we predict a record production level in 2009.

Stainless steel production in the remaining countries held up reasonably well. Mills in India maintained a strong activity level during the first three months of the year. This is expected to continue. Steelmakers in South Africa and Brazil made significant cuts in output in the first quarter but increases are predicted over the next six months.

Source: MEPS - Stainless Steel Review - click here for a free sample copy.

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