What Moly Oxide and Ferrochrome Prices Tell Us About the Current Stainless Steel Outlook

If Italy’s role in the European debt crisis is to have any tangible effect on the metals markets, it has already appeared on the European stainless steel front.

SMR, the Austria-based steel analysis firm, is forecasting that stainless steel demand could fall by as much as 10 percent in Italy in 2012, according to Reuters. Increased competition from Asian countries (which has been in effect for years now) and new austerity measures hoping to offset the sovereign debt crisis will be to blame, according to SMR.

Slackened demand is forcing the likes of ThyssenKrupp, Outokumpu and other European stainless steel makers to close down production significantly, a decision mainly led by new private equity investors who are bearish on the 2012 outlook, according to the article. It looks as though stainless steel demand in Western European economies (Italy, Germany, and others) will flat-line over the next year and a half, with Eastern European economies the only ones offering any sort of bright spot. However, US and global demand both look to be positive in 2012.

Key Components of Stainless Steel What Are They Doing?

Nickel prices should remain steady if not supported above $20,000 per ton, Marcus Moll, SMR’s founder, told Reuters. Also, the uptick in US molybdenum oxide prices could indicate increasing US demand.

The US moly oxide price stood at $12.78 per pound at the end of October, then rose to $12.83 per pound on Nov. 7; up to $12.93 on Nov. 10; and rose again on Nov. 14 to $13.43 per pound, according to our MetalMiner IndX. Although as of this writing the price has dropped to $13.25, Thompson Creek, a North American moly producer, quoted an average moly oxide price of $13.60 per pound on its website.

Ferrochrome prices, however, have fallen off in China. The local price fell to 8,300 yuan per metric ton from 8,500 on Nov. 8, and although it may appear as a small drop, sentiment from South African ferrochrome producers support the notion that prices in China have been low for a while. “People can’t lend at [the current] price level into China, Emmy Leeka, CEO of ferrochrome producer Hernic, told Reuters in another article. “Quite a number of guys are actually producing and dumping material into China below costs¦some of them are losing money already.

Industrial production and capacity utilization are both up slightly this month, based on the most recent numbers, and inflation is down, perhaps spurring consumers to make larger purchases (especially before the holidays); but can it be taken as a sign that the stainless market in the US is healthy? For one thing, the MEPS price index for North American 304 stainless dropped only 6 percent from September to October this year, compared to the EU’s drop of 10 percent. Ultimately, however, the picture is looking better in the US than in Europe, which is on the verge of its own 2008-style bust.

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