Commodities | Sep 28 2007
By Chris Shaw
Respected industry source Metal Bulletin recently held its sixth International Stainless and Special Steel Summit in Finland and analysts at Barclays Capital were present to note some points of interest from the meeting.
According to the group the view of attendees was the worst has likely passed for nickel prices and there should be something of a pick-up in line with the stainless steel cycle, though there was less certainty as to whether this pick-up would occur in the current quarter or early in 2008.
Participants also shared a belief longer-term prices should stay at reasonably high levels thanks to the combination of rising capital and labour costs and ongoing equipment shortages.
Another point of discussion was the potential emergence of Chinese pig iron production in the global market, as domestic production continues to grow despite the Chinese authorities introducing stronger controls on the operations of blast furnaces.
The issue here is twofold, as firstly the Chinese can produce the metal at very low capital costs, which has margin implications for the industry generally. The second and possibly more important issue is while pig iron remains a Chinese phenomenon for now there is scope for it to spread to the global market, which introduces another substitution option for those struggling to make money in the face of higher nickel prices.
The substitution issue therefore is seen as growing in importance in coming years, as evidenced by the recent trend being towards increased use of ferritic rather than austenitic stainless steel grades in an effort to counteract the higher nickel price.
Overall Barclays notes industry participants are confident on the price outlook as the outlook on the demand side is positive given Chinese buying remains strong and Indian buying is developing, while on the supply side any relief from additional production from new projects is not likely to flow through until the second half of next year.