STAINLESS STEEL OUTPUT WILL DECLINE BY ALMOST 1 MILLION TONNES IN 2008

In the first three quarters of this year, global stainless steel production was approximately one percent up on the 2007 outturn. In our September issue we predicted a modest decline in output for the full year. Now we believe that the reduction could be approaching one million tonnes - over 3 percent.

Stainless steel making in 2008 is expected to be down in all regions of the world. Consumption has collapsed in recent months. This was due, mainly, to credit difficulties encountered by both end users and distributors. However, the situation was exacerbated by a number of factors.

Service centres in the industrialised nations slashed prices in an effort to generate cash and reduce stock levels in line with the weakening demand. This had the effect of undermining mill prices because their premium for short delivery had been eliminated. Furthermore, inventories at the mills built up in the third trimester - forcing them to cut selling values in an effort to generate business.

A steady decline in raw material costs has taken place - particularly nickel over the past year but also molybdenum in the last six weeks. This encouraged buyers to limit forward orders on the mills and live off existing material or purchase ex-stock from the service centres. During the early part of the final quarter, the market became awash with steel and serious oversupply ensued.

The steelmakers' reaction to the dire situation was to cut output drastically. This action has been taken by virtually every producer as they strive to rebalance supply and demand in the hope of lifting prices.

It is likely that production curbs will extend for the next three months. Mill demand should then start to pick up but output is likely to be restrained into the summer. It is probable that 2009 will be an unprecedented third consecutive year of declining global stainless steel manufacturing.

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

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