Stainless Steel Has Uncertain Future

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Ferrous Metals, Supply & Demand

As we have reported previously, nickel prices have dropped in half from their peak last year, following a combination of grade substitution and massive stock draw downs combining to hit production. When production drops, one automatically assumes demand must have dropped — but apparently demand has remained reasonably steady as stocks have dwindled, and is now forecast to grow this year, according to the Paris based International Stainless Steel Forum ISSF. During 2007, stainless production in the Americas and Europe/Africa declined by almost 12% and 13.3% respectively but is forecast to grow by 3.7% and 4.4% this year. You will not be surprised to hear the largest producer and the greatest growth is forecast to be from China, not least because there are several new plants in the commissioning stage that will shortly be coming on stream creating a 7.3% increase in capacity. 

It’s hard to agree with the ISSF’s bullish growth forecasts, however, since North America and Europe have both proved to be surprisingly resilient in the face of weakness in the housing and automotive markets. I would expect any improvement in demand to be met by the new production capacity coming on stream and prices to hold reasonably steady through 2008. For the US, much will depend on the fortunes of the US Dollar. Continued weakness may prevent consumers from enjoying the benefits of wider import supply options and (as with steel this last year) seeing domestic producers take advantage of a tightening supply market.

–Stuart Burns

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