World output of crude
stainless steel in the first half of this year was recently reported
to have reached 12.9 million tonnes, an increase of almost 6 percent
on the same period of 2004. This is much more closely in line with
stainless steel’s long-term growth trend than the 7.4 percent
year-on-year advance seen in the first quarter of 2005 and the 9.1
percent rise in last year’s second half.
Almost all the growth in the first-half was
in China where production rose by more than 50 percent year-on-year.
Global output, excluding China, edged up by only 1.8 percent.
Oversupply in China meant weak prices there – and ThyssenKrupp’s
Chinese cold strip rolling affiliate recorded a loss in the three
months to the end of June.
The most recent figures demonstrate the
effects of mills restraining production – particularly in Europe,
but also in some Asian countries – in order to address price falls
by curbing excess supply. Several producers are continuing to cut
output into the third quarter of the year as sales remain weak.
After the earlier build-up of excess
stocks, adjustment has been taking place for several months. This is
continuing in the third quarter, while demand is diminishing for
seasonal reasons. Prices continue to fall.
The price of nickel has retreated from the
highs that it reached earlier this year. This means that alloy
surcharges are falling – in September they will be down by about
€40 per tonne in Europe and in the USA by about $US140 per short
ton for type 304 flat products.
In Europe at least, this is not likely to
give mills an opportunity to raise basis prices in the short term.
The northern hemisphere holiday season means that consumption is low
and buying is subdued. Some producers have had to cut output more
deeply than they originally thought. The North American market may
be somewhat more favourable towards a basis price rise, because
there is less overcapacity.
The industry is now trying to assess when
the current destocking phase will be completed. In the absence of
reliable statistics for inventories held by service centres and
end-users, this involves quite a lot of guesswork.
Finland-based stainless producer, Outokumpu,
recently reported that seeing beyond the third quarter was
difficult. Demand is expected to remain poor and basis prices to
continue drifting lower. Others say the production cuts already
announced should be sufficient to deal with the problem and the
inventory depletion should be completed by the final quarter.
