Latest Stainless Steel News 12/05/2010

Wed 12 May 2010

Asian stainless mills shaken after nickel drop

Asian stainless mills were taken aback by the swift drop in nickel prices last week and are waiting to see how nickel moves this week before deciding on price adjustments. Whilst most Asian stainless mills are still offering to customers prices before nickel prices dropped last week but if nickel prices keep falling, the mill will have to cut prices thereafter.

It is suggested that nickel prices holding in the $23,000-25,000/t range would be the most acceptable for (stainless) buyers and sellers. However, traders feel stainless mills will be forced to cut their stainless prices if nickel prices hover at around $22,000/t unless demand is exceptionally good.

Production Uncertainty from June

Asian stainless steel mills, particularly in China and Taiwan, are expected to continue producing at full capacity at least to end-May. But market participants remain uncertain on whether production will remain high into June and beyond.

Recent slump in nickel prices has raised concerns of a possible correction to stainless prices that had risen rapidly this year. A declining market may see stockists and coil centres take less stock from steelmakers.

Chinese stainless production has been boosted by strong export demand since the beginning of the year. But mills may have to cut production in the third quarter should demand ease as businesses slow down during the European summer holidays.

Asian stainless producers' profit margins are already thin for 300-series flat products, and some mills are considering shifting to producing other lower-nickel stainless grades. This could further depress demand for nickel, and lead to a further drop in nickel and hence austenitic prices.

Nickel to remain volatile in short-term

Market participants in Asia are expecting more volatility to nickel prices in the short-term after three-month nickel prices on the London Metal Exchange plunged by $3,000/tonne within a day to finish at $22,695/700/t on 5 May.

Industry observers blame the steep decline mainly on concerns over the Greek debt crisis and that it could spread to other European economies. They also cite Beijing's credit tightening measures that will affect metal demand in the country. Talk of a possible end to the strike at Vale Inco and rising nickel pig iron production in China – which could affect demand for nickel metal – also attributed to the price fall.

There are also fears that stainless steel demand may not be as strong as expected, and if so, nickel demand from the stainless industry would be affected.

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