05-06-2017

Falling Raw Material Costs Undermine Stainless Steel Prices

MEPS

A broadly common pattern is revealed from MEPS’ research, this month, across all products and all geographical regions. Stainless steel prices are falling – predominantly due to steelmakers’ reduced raw material costs. Consequently, buyers are minimising their purchases as they wait to see how far values will decline before bottoming out.

Transaction figures climbed during the early months of 2017, encouraging speculative buying, from stockists and traders, and precautionary purchases from end-users. This resulted in most supply chain participants building their inventories.

The upturn in prices was supported by a perceived recovery in real demand. Stainless steel market participants are now more confident, that end-user consumption is improving, than they have been for some years.

The supply of nickel tightened in 2014, when the government of Indonesia banned the export of unprocessed laterite nickel ore – the raw material for nickel pig iron. The rationale for this move was to encourage investment in processing facilities in Indonesia and to an extent, this has happened. As some of these new plants have come on stream, the export ban has been eased.

Indonesia’s place as the main supplier of nickel, especially to China, was taken by the Philippines. This source was placed in jeopardy, last year, when a new Environment Secretary, Regina Lopez, proposed the closure of more than half of the country’s nickel mining capacity, citing pollution issues. Ms. Lopez, however, was recently removed from office, and these policies are likely to be reversed.

Ferrochrome contract prices rose steadily during the second half of 2016 and, more sharply, at the beginning of this year. However, a downward adjustment in selling values was agreed for the second quarter of 2017. Further cuts are forecast for the third trimester’s business.

These trends in the stainless steel producers’ input costs promoted enthusiastic purchasing during the early months of this year and the more subdued atmosphere of recent weeks.

Source: MEPS

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