GLOBAL
STAINLESS STEEL OVERSUPPLY COULD LAST TO THE END OF THIS YEAR
Oversupply continues to
characterise many flat rolled stainless steel markets around the
world. Global output of crude stainless in 2004 was around 7.5
percent higher than the year earlier figure. The increase in supply
was so far out of line with consumption that it was followed by the
inevitable price weakness.
Taking the largest volume stainless
product, cold rolled 304, and excluding alloy surcharge, European
prices in period one averaged 3.5 percent less than in the final
trimester 2004. Prices dropped by roughly €100 per tonne from
December levels. In the USA over-supply has been less apparent
because of stronger underlying consumption growth. The decline in
price has been less marked in spite of the increase in production at
Acerinox’s melt shop. But in Asia there have been some steep
falls. Cold rolled 304 prices in China are reported to have lost the
equivalent of $US300 per tonne since early March.
Over-supply will continue to affect the
market for a little while yet. Additional capacity is entering the
scene. Outokumpu is ramping-up its newly expanded melting shop and
cold rolling facilities at the Tornio works in Finland. The company
has acknowledged that the weakness in the European market means it
is directing greater volumes of stainless into Asia instead.
European mills are also selling into Russia where local stainless
production has been reduced drastically owing to lack of
profitability. Chinese stainless output will rise this year, notably
with the start-up of new capacity at Baoshan and Taiyuan. China is
increasing its imports of stainless scrap from the USA by 20
percent.
Global stainless production so far this
year is growing more slowly than the unsustainable pace seen in
2004. In the European Union, output in January-February was about 4
percent ahead, year on year – a figure that is not excessive given
that the comparable period was hit by strikes. Our projection for
world stainless steelmaking in 2005 is a 3.7 percent increase over
last year’s 24.4 million tonnes. Assuming consumption rises at its
usual 5-6 percent, we can envisage balance being restored before
2006.
