Commodities | Mar 03 2010
By Rudi Filapek-Vandyck
Steel industry researchers at MEPS in London report stainless steel prices are likely continuing rising in the months ahead as input costs will rise and these higher costs will be passed-on to customers.
MEPS predicts price rises for all three key markets across the globe. Steel mills in the US and the EU are expected to implement basis hikes over the next few months as they try to move back into profit, reports MEPS.
The researcher believes these attempts to hike prices will at least partially prove successful as planned maintenance outages at some mills, coupled with production cuts in the west, will, almost certainly, help to alleviate oversupply pressures in the market. This should boost transaction values during the second and third quarters of 2010.
The nickel monthly average cash figure is expected to be approximately $US19,000 per tonne in February. Daily figures climbed above $US20,000 per tonne for the first time since August 2009. Stock levels held in LME warehouses fell continuously through most of the last four weeks. Mine strikes affected supply of the metal. Stainless steel demand also improved recently. This should help to boost nickel values in the short term but inventories remain at very high levels, reports MEPS.
Only modest nickel price gains are anticipated over the coming months. Oversupply issues are then expected to put negative pressure on values during the second half of 2010.
MEPS estimates world stainless steel demand is likely to grow by 10% in 2010, somewhat hampered by a fragile economic recovery and continued limited access to credit. Consequently, mill sales volumes are expected to stay below previous maximum levels.
There remains the danger that oversupply could become a feature of the market, once again, when new capacity comes on stream later in the year. MEPS believes this is poised to put downward pressure on prices in the final trimester.
Overall, however, higher raw material costs should help to support prices over 2010. An upturn in selling figures is then predicted for early 2011.
Earlier, the sector analyst reported it estimates global crude stainless steel production for 2009 will amount to circa 24.7 million tonnes. This would mark a decline of 4.6% from production in the previous calendar year.
MEPS' forecast for the outturn in 2010 is 28 million tonnes. If correct this would be just 0.2 million tonnes shy of the all-time high achieved in 2006. However, cautions the researcher, this does not represent equally good news for producers in all regions.
The predicted EU output of 6.9 million tonnes this year – nearly one million tonnes more than in 2009 – is 26.4% less than the 2006 result and the forecast tonnage for Japan is only 76.9% of the outcome four years ago. On the other hand, the anticipated figure of 9.6 million tonnes for China and Russia signifies growth of 73% over the same period.
Japanese production picked up in the second half of 2009, buoyed by recovering automotive and domestic appliance manufacturing. Operations are expected to continue at a similar rate, resulting in a 22.4%, year-on-year, increase in crude stainless production.
For the US MEPS anticipates moderate economic growth to yield a total of 2.15 million tonnes in 2010, 20.4% more than in 2009.
The total crude stainless steel outturn for South Korea for 2009 is estimated at 1.61 million tonnes – up by around 2% on the 2008 outcome.
MEPS reports demand in South Africa recovered from a dire situation twelve months ago to achieve stainless steelmaking tonnages in the third and fourth quarters which were higher than any recorded since the first half of 2007.
Production levels in Brazil also picked up in the latter part of 2009 but not sufficiently to prevent a fall of 13% compared to 2008. The rather different market conditions in India led to fairly stable output throughout last year.
Stainless production in China continued at close to capacity for most of 2009, although the mills cut back a little in the final two months in order to apply some control to year-end inventories, notes MEPS. However, the annual outturn was still an all-time high of around 8.7 million tonnes. A more moderate growth in output of around 7.9% is forecast for 2010.