Price & Supply Alert: Stainless steel prices stumble badly

Spot market quotes for stainless steel are 27.5 percent lower in October

Tom Stundza, Purchasing magazine -- Industrial Distribution, 10/4/2007 9:11:00 AM

Stainless steel depots are full throughout North America, mills have seen new-order bookings evaporate and early autumn prices for workhorse-grade Type 304 cold-rolled sheet are collapsing: Market reports from buyers show a dramatic slide of 27.5 percent this month to an estimated average of $3,945 per net ton.

That’s a $1,500 decline that comes very close to the Purchasingdata.com forecast for October spot sales of $3,932.

A report by MEPS International of Sheffield, England, adds that the corrosion-resistant Type 316 price in September was $6,062 per net ton, $1,232 below the August price. October's forecast is $739 per ton lower, at $5,323.

A separate MEPS analysis in its Stainless Steel Review points out that, “June 2007 was the peak month for stainless steel selling values,” so that the entire second half, “will prove to be a tough period for all stainless steel producers.”

Of course, buyers are not upset that mills in North America and the European Union, which use the alloy surcharge mechanism to bolster sales prices, now are offering massive discounts. The MEPS report says the plan “is to attract the small amount of business available.”

Worldwide stainless steel usage is due to grow 5 percent per year through 2011, forecasts Sérgio Mendes, commercial and services director at Brazilian specialty steelmaker Acesita. However, he admits that the stainless sector is going through a downward cycle on international markets, due to a drop in apparent demand. The scale of the decline is unknown, though, since the International Stainless Steel Forum only has data posted through March.

Purchasingdata.com surveys show that demand for stainless steel in the United States has been sliding for some months and is on pace this calendar year to decline by 8 percent to 2.92 million tons. As posted by the Metals Service Center Institute, stainless shipments through service centers, which supply half the North American regional marketplace, have dropped 3.6 percent through August (falling 3.4 percent in the United States and 7.9 percent in the smaller Canadian market).

“That’s why service center and end-use customers are reluctant to place large orders,” says steel analyst Mike Harrowell at Merrill Lynch & Co.’s Sydney offices.

Another reason for the price slippage is the dramatic midsummer decline in nickel costs, which take 60 to 90 days to show up in downward stainless steel market pricing—versus 30 to 60 days when alloying metals pricing are rising. The erratic nature of these prices—and their impact on stainless—is expected to continue.

More from Purchasing.com’s Price & Supply Alert:

Big drop seen in nickel prices for 2008

Industrial raw materials bounce back

Tinplate prices may increase by 15 percent

Slippage projected in aluminum prices

Molybdenum prices are drifting