This is a follow-on piece to our previous base metals quarterly pricing update post from last week. You can read that post here.
What to make of the stainless steel market? The market has been depressed by falling demand and a massive shift from nickel grades to chrome grades over the last two years. As a result, nickel prices have dropped by half since May 2007 and the stainless market has followed it down by some 27% according to distributors reported in Metal Center News. The switch to chrome grades has in turn driven up the chrome price but increases appear to be easing as demand remains flat. We may have seen the high point for the ferro chrome price unless major power or supply disruptions upset the market again. The falling nickel price will be welcome news to the two key markets that have continued to do well for stainless aerospace and energy. Worldwide manufacturers of aircraft have seen airlines scramble to achieve higher cabin utilization in the face of rising fuel costs and this has driven the replacement of larger, older and less fuel efficient aircraft with smaller regional jets. Massive investment in Middle East oilfields and refining/biofuels in North and South America have also driven demand for nickel based grades of stainless. The drastic drop in nickel prices has meant some mines have become less viable economically and as Mineweb reports new projects have been postponed. The nickel market may therefore be coming back into balance and the recent support for prices on the futures markets tends to support this view. With stainless production reduced, producers in Europe and Asia and anti dumping cases brought by Europe on China makes it unlikely we will see cheap imports offered into the US market. With surcharges stabilizing on the back of more settled nickel and chrome, we are calling the bottom on the stainless market and an expectation that re-stocking in the fall will see prices maintained at current levels even if a stronger dollar opens the door for more imports.
–Stuart Burns and Lisa Reisman