Despite prices and inventory levels being low, stainless steel buyers have remained cautious in recent weeks. They have been concerned that transaction prices in the immediate future are difficult to predict, particularly in the extent to which they are driven by the price of nickel on the international commodity markets.
UK based steel market analysts, MEPS say, a number of factors have been moving into line, which may prompt stockists and end-users to start ordering material. Developments in the markets for raw materials have led to substantial reductions to the alloy extras applied to austenitic steels in Europe and the United States in December. For example, the surcharge for type 304 flat products will fall by €113/t in Germany, while the reduction for the same product in the US will be US$135/t. Effective prices in Asia will also be adjusted to reflect earlier lower input costs. Increases in nickel prices in recent weeks suggest that surcharges will not fall further in the near term.
At the same time, stainless steel producers have been trying to introduce higher basis values. European mills have tabled increased figures in November. The acceptance of these changes has been patchy due to the lack of demand. US steelmakers have announced reductions to their functional discounts, effective for deliveries in the new year. The uptake of these, similarly, has been affected by the general shortage of orders being placed.
Some buyers, anticipating the reduction in surcharges, have already made their moves by placing orders at December prices. Many more are likely to follow suit, having made the calculation that the final month of the year will probably mark the low point in this cycle of transaction values.
Although a global surplus of nickel persists, MEPS anticipates a moderate increase in LME prices during the first quarter of 2013. Furthermore, inventories in the stainless steel supply chain are currently at very low levels. Consequently, MEPS predicts a degree of seasonal restocking in the new year, despite mediocre end-user demand.
Finally, in recent times, producers have been unable to achieve selling prices that significantly exceed their production costs. Similarly, stockists have struggled to make profits in depressed business conditions. It is likely that steelmakers and distributors alike will seek to benefit from the factors by increasing transaction values.
Source: MEPS - Stainless Steel Review www.meps.co.uk