WORLD AVERAGE STAINLESS STEEL PRICES - LATEST FORECASTS FROM MEPS

Rising nickel costs ensure that stainless steel transaction prices will increase over the next three months in all parts of the world. Expanding figures for ferrochrome and molybdenum over the same period are also a real prospect. We are bullish about stainless steel prices in the period to September, at least. We forecast a further 19 percent increase in our benchmark 304 cold rolled coil price over the next four months. Over that period, supply is likely to remain quite firm - at least in Western nations.

We have reservations about the prospect of this market continuing at the current level in the medium term. Production is starting to rise to meet current orders - a large proportion of which are speculation against rising raw material costs. As the third quarter develops, we expect to see a reduction in the volume of mill orders. This is likely to be followed by lower demand for nickel, chrome and molybdenum and a correction in their selling prices is anticipated in the final trimester or, perhaps, earlier.

We envisage our world stainless steel prices drifting lower in the last few months of 2006 and into the first half of 2007 at least. The steel mills should have caught up with orders before the end of this year. Production this year is likely to be substantially above the level of real demand. This prediction assumes a decrease in the price of nickel. This is by no means a certainty in these unpredictable times in the metal market.

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