STAINLESS STEEL PRODUCERS SLASH OUTPUT AS PRICE COLLAPSE SETS IN

Global stainless steel output is expected to reach 29 million tonnes this year - an increase of 2.2 percent on the figure in 2006. This may seem a reasonable outcome but all is not well in the market. In fact, if we exclude China, steel manufacturing in the rest of the world is forecast to decline by 5.3 percent.

Stainless steel mills in all countries are cutting supply in the third quarter. This action has been forced on the producers as customers reduce their inflated stock levels. These were built up over the past eighteen months as the price of nickel quadrupled in the period November 2005 to May 2007. Currently, the metal's price is half the peak value, three months ago.

We forecast crude stainless output in the EU, in 2007, falling to 8.55 million tonnes - a reduction of 8.5 percent, year on year. Very few orders are available as alloy surcharges are set to tumble over the next two months at least. Outokumpu has already announced production cuts.

US stainless manufacturing was already down by 190,000 tonnes in the first half compared to 2006. Further reductions are anticipated as market activity slows in the face of falling prices and inventory depletion. A 5.4 percent decline is predicted in 2007 relative to the previous year.

Stainless production in Japan in the first half of this year was considerably higher than the equivalent figure in 2006. However, output curbs have been announced. We now expect the final outturn for 2007 to be slightly down on the year earlier.

After an improved performance in the first half in South Korea, production cuts have been declared by Posco and Hyundai. This should translate into a marginal reduction in 2007. Taiwanese output has been sluggish and a 6.3 percent decrease is forecast this year. Countries in the "others" category had a good start to 2007 and reasonable levels of output are likely in South Africa, Brazil and India during the second half - leading to an overall rise in steelmaking.

Chinese production will be lower in the third and fourth quarters compared to the figures recorded earlier in the year. This should still leave the country's output in excess of 7 million tonnes in 2007 because of the heightened activity in periods one and two.                                      30.08.2007

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

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