NORTH AMERICAN AVERAGE STAINLESS STEEL PRICES - LATEST FORECASTS FROM MEPS

Stainless transaction values are expected to rise in March. We anticipate this to be the peak. This is despite the fact that alloy surcharges will increase at least up to April. Basis figures are forecast to fall to compensate for the inflated cost that the alloy surcharge will add. By April the surcharge is predicted to represent a staggering 74% of stainless selling prices. If nickel continues on its upward path, this percentage could become even higher. This could put mills under even greater pressure to reduce basis values further than anticipated.

Nickel has again broken new record highs during February. This was above our expectations. Stocks are as yet not arriving back onto the market and remain at critically low levels, with less than one day's worth of global usage currently available to the market. This may keep nickel prices elevated in the short term. However, high nickel prices are beginning to take their toll on the stainless steel industry with stainless demand expected to slow over the coming months. This could help to alleviate the current nickel supply shortages and bring prices down as the year progresses. The current elevated nickel prices are causing problems for both stainless steel consumers and producers. Substitution by low grade nickel pig iron is also taking place in Asia, with reports even suggesting successful use of this material in higher grade 300 series stainless production. This could also help to ease the current high demand for nickel. As such, prices are still expected to reduce during the course of this year falling approximately 33 per cent by December. 

In the longer term, we forecast a decline in stainless selling values as nickel prices reduce as demand slows and de-stocking continues. Both basis figures and alloy surcharges should begin to decline into quarter four of this year before stabilising as stock levels come under control. These factors would bring our prediction for grade 304 cold rolled coil transaction values in February 2008 to approximately $US1150 below the anticipated high point in March 2007, which is a reduction of around 21% from current levels.

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