NORTH AMERICAN AVERAGE STAINLESS STEEL PRICES - LATEST FORECASTS FROM MEPS

Stainless selling values are forecast to rise again in June. Alloy surcharges are set to increase as both nickel and chrome costs climb. Further basis price erosion is expected to compensate for some of this growth. Transaction prices over the summer months should then be relatively stabile as the upward movement in the alloy surcharge finally comes to an end.

Average monthly nickel prices moved up further in May, recording new record highs on several occasions. However, we anticipate values slipping slightly in June. This is due to Norilsk being unable to ship until mid June as a result of a port closure. The second half of the year is then forecasted to record sharper declines as slowing nickel demand from stainless steel mills in all regions takes its toll. During May, nickel inventories on the LME rose to their highest levels so far this year, with stocks over the past three months showing a definite upward trend. Many stainless mills are producing more nickel-free or low nickel containing grades as customer demand for these products increases. This is now causing upward pressure on Chromium figures. The nickel market is expected to return into balance by the end of the year with the risk of a potential severe downward correction of LME prices. Values are predicted to reduce to around $US35,000 per tonne by December 2007, before stabilising during the first half of 2008.

Stainless type 304 cold rolled transaction values are now expected to rise next month, with a small further increase predicted in July. We anticipate this to be the peak. At this point the alloy surcharge should represent approximately 78 percent of the transaction price for grade 304 cold rolled coil. In the longer term, we forecast a decline in stainless values as nickel prices reduce and demand continues to slow. In the first half of 2008, we should see stainless selling figures stabilise as mill order books begin to rebuild.                                                                   06.06.2007

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