The trend in MEPS world average stainless steel prices has been negative over the past twelve months. After falling during the latter part of 2011, transaction values climbed in the first quarter of 2012. Since March, selling figures have decreased slowly but steadily.
Basis prices, where applicable, have been under downward pressure as global economic problems have led to weak and uncertain demand for stainless steel. However, these figures have been close to the producers' breakeven marks and are, therefore, not susceptible to violent cuts. Alloy surcharges, though, have been more influential. The average extra for grade 304 flat products in the EU decreased by 15.6 percent in the year to August.
The slowdown in the growth of demand for stainless steel, especially outside China, has had a negative influence on the cost of raw materials, such as nickel, molybdenum and ferrochrome, although the benchmark figure for the latter is slightly higher than it was one year ago. Moreover, nickel has been subject to the general downward trend in globally traded commodity prices.
The current low cost of nickel may encourage a return to more output of austenitic grades. This would increase consumption of the metal. In Asia, the mills have, in recent years, produced more of the less costly 200 and 400 series materials.
Although global stainless steel production will increase only marginally this year, consumption will continue to grow in the medium term. The latest stimulus measures by the Chinese government should create increased demand in the Far East. The greatest rise in output, though, is predicted to be in the emerging economies in Asia, South America and the former Soviet Union.
Sales are expected to remain steady in all regions for the rest of 2012, resulting in a slight upward trend in stainless steel transaction values. A projected uptick in real demand should combine with seasonal factors to bring about more substantial hikes during the first half of next year. Selling values are expected to soften after June 2013, as the summer vacation period approaches.
Producers of both nickel and stainless steel are likely to cut back output in an attempt to balance supply and demand in the medium term. The proposed takeover of ThyssenKrupp's Inoxum business, by Outokumpu, will almost certainly be dependent on the closure or divestment of some production units. This is likely to mean a significant loss of steelmaking capacity in Europe.
Source: MEPS