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September Stainless Steel Prices Under Negative Pressure

The global stainless steel market is very subdued, at present. Purchasing activity has not picked up following the summer holiday season, in most parts of the world. Demand is weak, supply is plentiful and falling prices have made buyers more cautious.

Consumption is muted, in the industrialised regions. Statistical indicators suggest that economic growth is moving in a positive direction, in the West. However, this is not reflected in demand from the major stainless steel consuming sectors. The low oil price has brought about substantial cuts in investment in exploration and extraction. Constraints to government spending, in a world of post-financial crisis austerity, have resulted in limited infrastructure development. Depressed demand from consumers has had a negative effect on manufacturing and this, in turn, has restricted producers’ willingness to expand.

Since the global crash, there has been overcapacity, relative to demand, in the stainless steel producing regions of North America, Europe and the Far East. This has been exacerbated by the enormous increase in stainless steelmaking facilities in China. Crude stainless steel output in the country has more than quadrupled in the past decade – growing, in the process, from 18.5 percent of the world’s production in 2006 to 52 percent last year.

As the rate of economic growth has slowed, recently, in China, the global excess availability of stainless steel has been magnified. Competition between suppliers has become more intense, with the inevitable, negative effect on prices.

Falling raw material costs have had a further influence on stainless steel transaction values. The LME nickel cash figure has been on a downward trend, losing more than half of its value since peaking in May 2014. This has contributed to European alloy surcharges for grade 304, for example, dropping by around 25 percent, since last October.

On a more positive note, MEPS predicts that nickel values have reached a “floor” and will remain stable during the final months of this year, before recording moderate gains during the first half of 2015.

Source: MEPS

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