STEEP RISE IN NICKEL COSTS BOOSTS STAINLESS STEEL PRICES

Independent Stainless Steel PricesThe forecast upturn in demand for stainless steel did not materialise during the first quarter of 2014. As a result, basis figures, net of alloy adjustments, have risen very little, if at all. However, recent increases in nickel costs have lifted stainless transaction values and kick-started purchasing activity.

The recent rapid rise in LME nickel figures has shown how speculators on the commodities markets tend to react in a more volatile manner than raw fundamentals would suggest.

The Indonesian mineral ore export ban has had a small effect since the beginning of the year, causing prices to climb slightly. However, other, conventional nickel producers have stepped up their output in order to reduce the shortfall. In fact, as MEPS has previously written, nickel supply continues to be in surplus relative to current demand. Furthermore, significant excess inventories remain, in LME warehouses and in other stockpiles – notably in China.

The nervousness of speculators has been exacerbated by the recent unrest in Ukraine and Crimea, which has led investors to panic over the outlook for the international availability of nickel from Russia. Again, the reaction of the market has been disproportionate to the real threat to nickel supplies.

The result of this activity is that the LME Nickel Cash price rose by over US$2000 per tonne between 25 February and 26 March, an increase of over 14 percent. Several metals quoted on the LME tend to follow the same, technically-driven trading patterns. However, the copper price, for example, which often follows similar trends to nickel, fell by around US$600 per tonne, or 7.5 percent, during the same period.

As a result of the rise in raw material costs, austenitic stainless steel transaction values have advanced in recent months and are likely to continue to do so in the short term. In addition, many market participants report positive signs, reflecting that consumption will increase, either due to seasonal trends or because of genuine, underlying economic recovery. This, together with the input price inflation, may enable producers to lift basis values, too.

This combination of factors will lead to some contradictory behaviour. Some stockists will build their inventories, hoping to sell material quickly, at a greater margin, while prices continue to rise in the near term. Others, such as OEMs, may have replenished their stocks during the early part of the year, when selling values were low. Now, with no need to buy large quantities, they may minimise their purchases, in the belief that prices will decline again within a few months.

Source: MEPS Stainless Steel Review

EUROPEAN STEEL MARKET PRICE ROUNDUP FROM MEPS

European producers of flat steel products have, so far, failed to close deals for the second quarter at the targSteel Prices in Europeet prices they initially announced. Falling input costs have hindered the mills’ aspirations. Moreover, offers from third country sources are becoming more competitive, although the lengthy delivery lead times involved are still considered to be a big risk in today’s market climate. Domestic steelmakers are hopeful that a small increase can be secured for orders placed over the next few weeks. Economic indicators remain good in several countries.

After a weak start to the year, demand from German end-users is now either stable or growing. However, customers are not yet ready to pay the proposed second trimester increase of €30/40 per tonne. Producers have already lowered their expectations to around €10/20 per tonne.

The French market has been described as lethargic, lacking dynamism, with stagnant average demand since January and even sagging end-user activity. In such conditions, it has not been possible for producers to lift their prices.

In Italy, market players are viewing the changing political environment with great caution. MEPS has noted a number of negative developments in the steel sector. End-user activity has slowed, creating pressure in the distribution segment. The mills have become more flexible in their attitude during price negotiations.

In the UK, the announced increases have not filtered through to the market. The strong local currency is working in the favour of importers, both from mainland Europe and from third countries. Service centres report that demand is still reasonably good but may have slowed a little.

In Spain, there is still pressure from domestic producers to lift basis figures for second quarter business but import offers are becoming cheaper. Consequently, for now, customers are reluctant to accept increases. End-users are also refusing to pay more to the distributors.

Source: MEPS – European Steel Review

MEPS PREDICTS A BETTER YEAR FOR STAINLESS STEEL IN 2014

The prevailing sentiment throughout the stainless steel supply chain is one of “cautious optimism” that 2014 will be a little better than 2013, in terms of both business volumes and profitability.

Market participants have been, for some time, expressing the view that activity and prices have been bumping along a prolonged bottom in the business cycle and that that situation is close to its end.

A number of major western industrial nations have begun to record encouraging economic indicators, such as positive GDP growth, increasing manufacturing output and falling unemployment. The Japanese government’s economic stimulus measures, or “Abenomics”, have, at least in the short term, boosted industrial activity in a market that has been in the doldrums for two decades.

MEPS forecast for crude stainless steel production anticipates growing output in all the traditional stainless steelmaking countries and regions – the EU, the United States, Japan, South Korea and Taiwan. This would be the first time this has happened since 2010. Furthermore, stainless steelmaking capacity continues to grow in the developing markets, despite existing oversupply. We, therefore, predict output in China and other emerging countries to continue to increase slightly faster than in the West.

Nickel values are expected to rise in the early part of this year, despite the enduring global surplus. The medium-term effects of Indonesia’s imminent ban on mineral ore exports remain uncertain. Meanwhile, further hikes in ferrochrome prices are foreseen during the first half of 2014. Although stainless steel suppliers have, so far, reported no sign of a significant upturn in order tonnages, the belief persists that there will be a moderate increase in activity in the coming months and that 2014 could be the industry’s best year for some time.

Source: MEPS –Stainless Steel Review

MEPS WORLD COMPOSITE STEEL PRICE AT A NINE-MONTH HIGH IN DECEMBER

An upturn in steel prices in North America and the European Union at the end of the year, pushed the MEPS world composite benchmark steel price to its highest level since March.

US demand for flat products is stable but expected to show some signs of growth shortly. Inventories throughout the supply chain are tightly controlled at a low level. Ex-mill transaction values have continued to escalate over the last month. Producers’ scrap costs are also rising. With good order books for the first quarter 2014 and extending delivery lead times, the steelmakers may well endeavour to hike prices further in the coming weeks.

In Canada, mill rolling schedules are reasonably full with order placement now well into February. Transaction figures are firm and, in some cases, above those of the previous month. However, at the service centres, demand is still inconsistent. It is a struggle for them to pass on all the mill increases to resale customers, who are only purchasing what they currently need, rather than rebuilding stocks. Nevertheless, buyers believe there is still room for further price improvements.

The recovery in the Japanese economy continues, leading to healthy and growing steel consumption. Producers are slowly, but surely, securing their proposed price rises. Inventories held by dealers are now well controlled. Export figures are also moving up, helped by the weak yen, although volumes have fallen as demand in key Asian markets is dull. The depreciated currency is also discouraging cheap imports.

The basis increase scheduled by the West European flat products producers for the first quarter 2014 has not been secured for January production. Demand remains slow across the region. Negotiations for the remainder of period one are ongoing. Long product prices have advanced slightly as the mills take advantage of upward scrap movements.

Source: MEPS International Steel Review