May 5 2010
Stainless steel transaction prices have climbed steeply over the past twelve months. Although improvement in demand since the darkest days of the recession has been a contributing factor, the major influence on the selling value of stainless steel has been the cost of raw materials - most notably, nickel.
The LME cash monthly average price for March 2010, at $US22,446, represented an increase of 131.6 percent over the nickel figure one year earlier. In Europe, this resulted in ArcelorMittal's alloy surcharge for type 304 flat products this month being €1451 per tonne, which is 133.7 percent higher than in April 2009. This in turn, affected the MEPS EU average 304 cold rolled coil transaction value for April 2010, which was up by 73.9 percent, year-on-year.
The story for molybdenum is similar. The EU monthly average price for 65-70 percent ferro-molybdenum this month, at $US42.313 per kg, is 93.4 percent higher than the figure twelve months ago. Consequently, ArcelorMittal's April alloy surcharge for type 316 flat products stands at €2380 per tonne, up 139.9 percent, year-on-year. In turn, the MEPS EU average 316 cold rolled coil transaction value for this month is €3903 per tonne, up by 74.2 percent on the April 2009 figure.
Since the beginning of 2010, major hikes in all raw material costs have led to soaring alloy elements in stainless steel prices. Nickel and molybdenum values have continued to climb beyond all expectations, while contract figures for ferrochrome have risen alarmingly. The same is true of iron ore, which, while not a direct ingredient in stainless steel, will have influenced carbon steel scrap values. Meanwhile, both ferrous and stainless scrap have been in relatively short supply, as arisings from manufacturing have reduced during the economic downturn and collections of end-of-life materials have been depressed by low prices.
The final element in the recent ascent in stainless prices has been the strategy of the producers. Most have attempted to keep output in line with demand. Furthermore, after an extended period of unprofitable operations, the mills have sought to maintain a reasonable margin in their selling values. However, the rapid climb in transaction figures in many markets has not been supported by any significant upturn in end-user consumption. Participants in the stainless steel supply chain have been happy to see prices trending upwards.
Purchasing has been stimulated, as stockists speculate on rising inventory values and end-users buy early to minimise input expenditure. The costs of stainless steel and its ingredients cannot continue to grow, though, without a substantial pick up in demand and market players are controlling their stock levels and nervously anticipating the point at which prices will start to fall.
Source: MEPS