MEPS Predicts Insignificance of Changes in Stainless Steel Markets in 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--Stainless steel markets throughout the world are being influenced in different ways by raw material costs, producer targets, and end-user demands, reports MEPS (International) Limited (Sheffield, England).

In Europe, the high nickel prices at the London Metal Exchange (LME) in late December and January caused alloy surcharges in February to increase significantly. The surcharges are expected to continue increasing in the face of rising costs for raw materials such as ferrochrome and iron ore. However, the rise in prices has not resulted in the expected increased purchases that generally accompany such circumstances.

Surcharges in February have risen similarly in the U.S. and are expected to rise further in March. On both continents, the price advances announced by certain producers have not been accepted by all. Consumer demand and spending still have not recovered completely from the recessionary effects. Large projects in the U.S. are not progressing as planned because of the delay in obtaining funds from both government and private sources.

The economies of certain Asian countries are showing faster recovery. The Japanese market is witnessing an increased demand for domestic appliances and automobiles. The increased demand in these sectors has not caused the market price of stainless steel to rise. The construction sector has not shown any increase in demand.

The stainless steel markets of China, Korea and Taiwan were not significantly affected by the economic downturn, and production in these nations continues closer to full capacity than in the U.S. or Europe. Domestic steel prices across India are showing great variation. The size of the market at different locations is an important factor in these differences.

MEPS expects the hike in alloy surcharges to bring about a rise in the selling prices of all austenitic products in the Asian market. Distributors are expected to refill their inventories and improve sales volumes. Raw material prices are expected to increase toward mid-2010, and this is expected to increase transaction values. Low stock levels may be a common factor across the supply chain, causing prices to rise further.

Nickel prices varied widely throughout the global economic downturn. LME prices peaked in May 2007, but fell by more than 80% at the end of 2008 as demand fell. The prices had recovered somewhat by the fourth quarter of 2009 to $18,500 per ton. In spite of the fall in global demand for nickel over a period of three years, consumption is expected to increase in 2010. Analysts at Roskill Information Services (London, England) have forecast an increase of about 7% in the consumption of nickel in 2010.

Demand for nickel in the next few years will increase as the demand for stainless steel rises. The stainless steel industry is the largest consumer of nickel. This year global stainless steel production is expected to increase 8% from 2009, reaching 27 million tons in 2010 and close to 30 million tons in 2011. The consequent increase in nickel production is expected to result in a market surplus of 75,000 tons in 2010 as production reaches an expected 1.4 million tons. The market surplus over the next two years is expected to keep nickel prices stable. While the average annual price in 2010 has been forecast to be about $20,000 per ton, it is expected to increase in the next two years and reach more than $22,000 per ton.

Among other developments, stainless steel company Acerinox SA (MCE:ACX) (Madrid, Spain) recently announced that in March it would increase production at the company's manufacturing facility in Campo de Gibraltar to 75% of its design capacity, which is 5% over current production levels. According to the chairman of the company, the manufacturing facilities of Acerinox change their capacity utilization based on the size of the orders received. The decision to increase the production capacity at its facility in southern Spain signifies that the company has noticed an increase in demand for stainless steel, a positive sign in the current market.

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