BUILDING AND RISING NICKEL COSTS DRIVE STAINLESS STEEL PRICES HIGHER
Stainless steel producers from
Japan in the east to Kentucky in the west seem to have decided that
they have had enough of falling prices and are acting to reverse the
downward trend. The first few weeks of 2006 have seen a flurry of
announcements of intended selling price rises.
It is quite unusual for producers in Asia,
Europe and America to go for price hikes all at the same time. Three
factors have prompted this unusual unanimity. First, price weakness
has affected all major markets. Second, Chinese production of cold
rolled stainless is lower than had been forecast – thus reducing
fears of excess supply. Third, alloy costs are on the rise.
Between January and December last year,
basis prices for grade 304 cold rolled stainless coil (excluding raw
material surcharges) fell in many of the world’s principal
markets. The drop was relatively minor in the US. However, in Europe
the price went down by 25 percent.
Last year’s cuts in production seem to
have brought a bit more balance to the supply-demand picture. We
estimate that crude stainless output in the second half of last year
slipped by at least 12 percent in Europe and the Americas. Output
also appears to have fallen in Asia, though more modestly.
The prospect of rising alloy surcharges
next month has encouraged buyers to come back into the market to
rebuild their depleted stocks. Mills, therefore, seized the
opportunity. Among the first to move was Arcelor’s subsidiary
Ugine & ALZ, which is proposing a €50 per tonne basis price
increase from February and another €50 per tonne rise in March.
Other European mills are following a similar line.
In the Americas it was NAS which led the
upward move – announcing plans to raise basis prices by about 3
percent effective March 1. This is the first such attempt in 18
months, and was followed by other major producers.
In Europe and America the mills will have
the challenge of pushing through basis price hikes at the same time
as alloy surcharges are rising. This is a practical proposition if
the cost of nickel continues to increase for several months.
However, this latest order burst could be short lived if nickel
prices start to retreat once again.