STAINLESS STEEL PRICES TO RISE IN 2010

Stainless steel prices have recorded large declines over the last twelve months. However, the bottom of the price cycle was reached early in the second quarter of this year. Between August 2008 and this point, transaction values for cold rolled coil type 304 in North America dropped by approximately 60 percent. In the EU, selling figures tumbled by over 52 percent and Asian numbers reduced by around 47 percent.

Alloy surcharges in the West continued falling up to May 2009 as raw material costs plunged. Nickel values on the LME moved below $US10,000 per tonne for the first time since September 2003. Chromium and molybdenum figures also plummeted by more than 70 percent by April. Consequently, most stainless steel buyers withdrew from the market.

Service centres rushed to sell material as the value of their inventories collapsed. Discounts on prices did little to encourage any real increase in purchase volumes. As a result, mills in all regions slashed output in a bid to stabilise the market.

By the end of the second quarter of this year, stock levels held by distributors and end-users were at extremely low levels. Input costs also began to rise. These factors helped mills in all regions to force through advances in stainless selling figures over the past three months. Some end-user sectors began to recover slightly, particularly the automotive industry. However, consumption on the whole remains weak.

Transaction values for austenitic flat products are forecast to continue moving higher in the short term. Customers are expected to increase order volumes further as they fill gaps in their inventories. Escalating raw material costs will also put upward pressure on stainless prices during the coming months. However, end-user consumption is likely to remain low throughout the remainder of 2009. This could restrict the increases in selling figures.

Service centres in the EU and US are unlikely to build significant inventories in the run up to the financial year end. Production in all regions is expected to rise during the fourth quarter. This could lead to oversupply and result in some price slippage during the final few months of 2009 in all parts of the world. A drop in nickel costs could add to the downward pressure over this period.

The global economic situation is expected to be on the road to recovery by the beginning of next year. Credit availability is likely to increase as banks strengthen their reserves and the amount of toxic debt is finalised. This should filter through to improved sales across the steel industry as buying power grows.

Government stimulus projects are likely to boost stainless demand. A rise in consumer spending could also help to improve consumption, particularly in the appliance sector. This should give distributors more confidence to further their inventory rebuilding plans. Consequently, we forecast the price recovery to resume early in 2010 with advances predicted to continue up to the summer.

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

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