EU STAINLESS COLD ROLLED COIL AND NICKEL PRICE FORECASTS FROM MEPS

As expected, the MEPS EU Average Cold Rolled Coil type 304 transaction price moved down in October by 3 percent. This was due to further declines in alloy surcharges. Buyers remain cautious about placing forward orders. As such, mills may struggle to increase basis values significantly before early 2008.

The MEPS EU Average Cold Rolled Coil type 316 transaction price also reduced in October. However, the drop was higher at 6 percent due to the greater impact of the nickel price decline on the alloy surcharge for this product. Producers have recently recovered some of the basis premium over type 304 which fell dramatically in July. The difference at that time slumped to a ten year low of just €238 per tonne but should return to around €380 over the next few months.

We maintain our belief that the EU market for both products will pick up during the first quarter of 2008 as customers rebuild depleted inventories. This is expected to encourage stainless producers to lift production.

NICKEL

The monthly average cash nickel price moved up in October, ending marginally lower than anticipated. Inventories continued their steep ascent, rising 13.6 percent since the end of September. However, the rate of increase slowed considerably over the last week of the month. In the short term, nickel values are likely to remain relatively stable due to high stock levels in LME warehouses and seasonally lower demand in the stainless market during the fourth quarter.

We believe nickel values will stay above $US30,000 per tonne during the forecast period. Prices are expected to move higher in the first half of 2008. However, meteoric rises (like those recorded since the beginning of last year) are not anticipated.

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

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