Commodities | Mar 02 2007
By Chris Shaw
Prices for stainless steel appear under threat from higher nickel prices and the resulting alloy surcharges according to steel industry consultants MEPS.
The group points out nickel prices averaged more than US$41,000 per tonne in February, a record level, which is driving up alloy surcharges on stainless steel products. As an example the consultant estimates the surcharge in the US market for type 304 cold rolled coil will be more than US$3,700 per tonne in April, while the different calculation method in the EU market implies a surcharge of more than US$3,500 in May.
In the view of MEPS mills in both regions will be unlikely to be able to pass on the full impact of the higher alloy charges without cutting base prices, especially given supply has become easier of late thanks to the emergence of lower priced imports.
This has driven some de-stocking in the US market, which is generating an oversupply situation as buying orders dry up. Given this environment buyers are unlikely to accept the full price plus a surcharge, so prices appear headed lower.
A similar outcome looks likely in Europe, as MEPS notes the Italian market is currently experiencing strong supply growth from low-priced imports, a trend it expects will flow through to the rest of Europe in coming months.