There are tentative signs that the stainless market has bottomed and though a significant rise in prices is some way off Acerinox in Spain has lead the way with Euro 100/metric ton ($110/t) price increases in April and May according to Reuters. Both price rises appear to have stuck but the firm says it will be months before they push for any further increases. 45% of Acerinox’s business comes from the US, where the firm says demand from distributors remains flat. The increase in demand, such as it is, is coming from end-users but is still weak. However the company had its best order intake in May since September last year so is cautiously optimistic that distributor re-stocking could gradually resume in the next two months.
Korea’s Posco however is still having a torrid time slashing prices a further 19% for HR and 18% for CR stainless steel in the face of weak sales, even as nickel prices have risen. Our MetalMiner IndX shows prices in China have been drifting lower this year but appear to have also bottomed this quarter, as demand has slipped by about 10.7% according to Michael Wright of ELG Haniel, a major scrap recycler speaking at a conference in Dubai. According to Wright, demand will be hit more in Europe and the US where consumer goods are down 22% in Europe and automotive 38% in the US. Although production has dropped by 35-40% this year, demand is expected to make a modest recovery towards the end of the year as consumer demand makes a gradual and cautious recovery. Stainless production capacity still exceeds demand and the excess capacity will limit the ability of producers to raise prices significantly even if demand picks up.
The one area of demand that had been holding up was aerospace, according to the first quarter results of US producer Universal Stainless & Alloy. This isn’t likely to continue though, Boeing was reported in the NY Times last month as saying they intend to reduce production of their twin aisle 777’s and delay a planned increase in 747 and 767 planes. Airbus is also facing a sharp drop in orders and customers postponing delivery of existing orders forcing the company to scale back production plans this year on the A380 from 18 to 14 and of the bread and butter A320 from 36 to 34 per month according to Flight International.
All in all the stainless market is unlikely to see a surge in demand this year but producers can at least console themselves that they have probably seen the bottom. Growth from here, both in demand and prices will be slow but stainless consumers may look back on mid 2009 as when the market started it’s slow recovery.