NORTH AMERICAN AVERAGE STAINLESS STEEL PRICES - LATEST FORECASTS FROM MEPS

In February and March we expect stainless transaction values to rise to new record highs due to inflated nickel prices in December and January. We believe that basis figures should begin to fall and that this may partly offset the hike in the alloy surcharges over the next two months. De-stocking is likely to continue in the near term putting ever increasing pressure on the mills to reduce basis prices as the alloy surcharge rises and customers struggle with the high transaction values. March is expected to be the peak of the current cycle. The alloy surcharge will represent more than two thirds of the transaction value at that point. Prices are then predicted to fall into the fourth quarter of this year.

Nickel has again broken new record highs on several occasions during January, even after announcements that the four month long general strike in New Caledonia has now ended. This was attributed to fears that the Xstrata contract talks may lead to a strike at the Sudbury mill in Ontario. Union members have voted in favour of a walkout if a new agreement is not reached by January 31st. There is the possibility of even higher prices if the industrial action does go ahead. However, our forecasts are based on the assumption that this will not happen. Nickel inventories still remain at critically low levels, although the supply demand balance is likely to ease as the year progresses. Nickel values are expected to reduce during 2007 and into 2008.

In the longer term, we forecast a decline in stainless selling values as nickel prices reduce and demand slows as we enter a de-stocking phase. Both basis figures and alloy surcharges should begin to reduce into quarter four of this year before stabilising as stock levels come under control. 

Source: MEPS - STEEL PRICES ON-LINE (regional steel price tables & forecasts)