Steel sales set to dip
A
MEPS (International) product story
Edited by the Engineeringtalk editorial team
Oct 3, 2007
Western steel makers' financial performances will be badly hit in the August to December period.
June 2007 was the peak month for stainless steel selling values.
The third quarter and much of the final trimester will prove to be a tough period for all stainless steel producers.
Mills in Western countries (North America and European Union), which operate the alloy surcharge mechanism, are offering massive discounts on published basis, or alloy surcharges to attract the small amount of business available.
They are suffering substantially reduced activity.
Moreover, they are diverting, where possible, over-production to their depots, which are now almost full.
It is inevitable that the steel makers' financial performances will be badly hit in the August to December period.
Nickel prices dropped in mid August to just above US $US25,000 per tonne.
Figures rose to US $US 32,600 by 24th September 2007.
The MEPS Stainless Steel Review expects alloy surcharges for grade 304 to rise in the US in November and the EU in December.
This should translate into higher transaction values near the end of the year or early in 2008, depending upon the inventory draw down over the next few months.
We should, however, not feel too sorry for the mills.
They enjoyed substantial profits over the past twelve months as artificial demand was created by the hikes in the nickel price.
This gave them opportunities to significantly lift basis values and alloy surcharges.
Full year results are expected to be excellent for the majority of stainless steel makers.
Asian mills have not fully embraced the alloy surcharge mechanism.
They relied upon lifting selling values in line with the cost of raw material inputs plus a modest amount for improved demand.
With nickel prices rising once again they are attempting stainless price hikes.
This may meet with only limited success in the short term.
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