WORLD AVERAGE STAINLESS STEEL PRICES - LATEST FORECASTS FROM MEPS

So far, the substantial rises in nickel costs in July (to beyond $US26000) have not been incorporated into selling values in any part of the world. These are likely to have an impact in North America and the EU in September/October. At the same time, the Asian mills should be able to move up transaction prices from earlier upward trends in nickel. All this activity leads us to lift our forecast for world prices. A substantial rise is predicted for September. Transaction prices should expand in all regions for most of this year.

We are, however, slightly bearish about the prospects for 2007. Many pundits predict a decline in nickel prices next year. The LME - 15 month figure on 27 July was around $US19500. Slight shortages of supply are pushing basis prices higher in the US. Tight supplies in the EU are having a similar effect. Substantial inventory building is occurring in both markets and will extend up to the end of the year. We expect sentiment to change in 2007 and a period of stock depletion is anticipated - particularly if the nickel price continues to slip. Real demand across the world is growing at a significantly slower rate than production. We believe that most markets have recovered from the destocking phase in 2005 and inventory building is currently taking place ahead of impending price rises.

We forecast the MEPS world stainless steel transaction values peaking towards the end of this year and falling in mid 2007 to a figure close to current levels.

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