Stainless steel double digit price hike in 2011

After many months of unchanged stainless steel basis values in the United States, they seem to be on the up. Inventories have been pared back to minimum levels and demand is improving consistently if not spectacularly. Strengthening LME nickel values over recent months will mean steadily climbing surcharges in the short term. The forthcoming hikes in flat product basis prices, which have reportedly been mooted by all the US stainless producers, are almost certain to succeed. Higher basis numbers for long products, announced by some of the smaller mills during the fourth quarter, have now been adopted by the major players and will be in force from January 2011. Transaction figures for flat products will drop in January due to the lower surcharge. Thereafter, the MEPS North American Average Forecast for grade 304 cold rolled coil anticipates prices increasing in each of the following six months.

Effective values for stainless steel in Asia tend to respond quite quickly to fluctuations in the LME nickel price. Consequently, selling figures in most Far Eastern markets dipped in early December, exacerbated by aggressive selling by regional producers, especially Posco.

Now there are positive signs. The weakening of the Korean won against the US dollar will increase raw material input costs and push domestic selling values upwards. The major Taiwanese producer, Yusco, has already announced increased export prices for the second half of December. Economic growth continues apace in China. The return to monthly pricing by Shanxi Taigang Stainless Steel should lead to steady progression in the early part of 2011 rather than frequent positive and negative movements. The MEPS Asia Average Forecast for type 304 cold rolled coil foresees transaction figures rising consistently until July 2011.

Basis values in Europe appear to have reached rock bottom. The producers' list prices have remained unaltered for many months, although lower figures have been achievable in some markets as suppliers have engaged in the annual scramble to reduce year-end stock levels.

However, the mood in Europe is one of cautious optimism. Inventories throughout the supply chain are lean and observers believe there will be sufficient demand in the short term to support higher basis figures. The MEPS EU Average Forecast for type 304 cold rolled coil predicts transaction values will climb steadily throughout the first half of 2011.

Source: MEPS