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Stainless steel prices continue to fall

A MEPS (International) product story
Edited by the Engineeringtalk editorial team Sep 1, 2005

World output of crude stainless steel in the first half of this year was recently reported to have reached 12.9 million tonnes, an increase of almost 6% on the same period of 2004.

World output of crude stainless steel in the first half of this year was recently reported to have reached 12.9 million tonnes, an increase of almost 6% on the same period of 2004, according to MEPS Stainless Steel Review.

This is much more closely in line with stainless steel's long-term growth trend than the 7.4% year-on-year advance seen in the first quarter of 2005 and the 9.1% rise in last year's second half.

Almost all the growth in the first-half was in China where production rose by more than 50% year-on-year.

Global output, excluding China, edged up by only 1.8%.

Oversupply in China meant weak prices there - and ThyssenKrupp's Chinese cold strip rolling affiliate recorded a loss in the three months to the end of June.

The most recent figures demonstrate the effects of mills restraining production - particularly in Europe, but also in some Asian countries - in order to address price falls by curbing excess supply.

Several producers are continuing to cut output into the third quarter of the year as sales remain weak.

After the earlier build-up of excess stocks, adjustment has been taking place for several months.

This is continuing in the third quarter, while demand is diminishing for seasonal reasons.

Prices continue to fall.

The price of nickel has retreated from the highs that it reached earlier this year.

This means that alloy surcharges are falling - in September they will be down by about Eur 40 per tonne in Europe and in the USA by about US $140 per short ton for type 304 flat products.

In Europe at least, this is not likely to give mills an opportunity to raise basis prices in the short term.

The northern hemisphere holiday season means that consumption is low and buying is subdued.

Some producers have had to cut output more deeply than they originally thought.

The North American market may be somewhat more favourable towards a basis price rise, because there is less overcapacity.

The industry is now trying to assess when the current destocking phase will be completed.

In the absence of reliable statistics for inventories held by service centres and end-users, this involves quite a lot of guesswork.

Finland-based stainless producer, Outokumpu, recently reported that seeing beyond the third quarter was difficult.

Demand is expected to remain poor and basis prices to continue drifting lower.

Others say the production cuts already announced should be sufficient to deal with the problem and the inventory depletion should be completed by the final quarter.

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