MEPS Forecast North American Stainless Steel Prices

Alloy surcharges for austenitic grades will move higher again in August 2009. Our transaction figures have been adjusted accordingly. However, as no research is conducted in August due to the summer holidays, basis values have been kept at the same level. Distributors are expected to push through basis advances in September. Distributors are likely to return to the market as they refill depleted inventories.

However, sales to end-users are forecast to stay low throughout the remainder of 2009. Re-stocking by service centres may be kept to a minimum in the run up to the financial year end. Consequently, we predict some price slippage during the fourth quarter of 2009. A possible drop in LME nickel values could also put downward pressure on stainless steel transaction values over this period. Rising molybdenum and Chrome costs could offset some of these reductions.

The monthly average cash nickel value is expected to climb by almost $US1000 per tonne in July - mainly due to speculative buying by investors and reports of a recovery in stainless steel output. However, LME inventories remain above 100000 tonnes, despite a modest decrease during the second half of July. We believe, therefore, that the nickel price is due to decline because it has soared above figures suggested by market fundamentals. This could happen over the summer period. Miner's strikes should have little impact on supply as operations in other plants come back on stream. Consequently, bloated stock levels held in LME warehouses may not reduce significantly this year - putting further negative pressure on nickel values. Cash figures are then forecast to rise early in 2010 as stainless steel production returns closer to near normal volumes.

Rising raw material costs, coupled with improving end-user consumption, should help to lift stainless steel selling figures during the first half of next year. Federal stimulus plans are also expected to filter through to higher sales. However, we do not envisage prices moving back to the 2008 levels. Market demand is likely to be slow to recover. This could offset the positive impact from the $US787 billion US stimulus package.

Source: MEPS

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