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Global Stainless prices converge
October 2001
The worldwide collapse in stainless cold rolled sheet transaction prices appears to be slowing down. Further modest reductions are anticipated as the year progresses. However, it is believed by MEPS that the bottom of this cycle will be reached sometime during the first half of 2002.
Selling prices in the United States plummetted faster than in any other region over the past eighteen months. The substantial premium enjoyed by producers in this market, over suppliers in the rest of the world, has almost disappeared. Transaction prices for grade 304 cold rolled coil have equalised in the main consuming areas. Only 3 percent now separates the average values in the European Union, United States and Asia.
Transaction price reductions are expected through November and December in the US and EU as alloy surcharges are cut. This will be the result of substantial falls in nickel costs as values on the LME have steadily decreased through September and October. It is possible that cuts in alloy surcharges could extend into next year, due to delays in applying reductions in the price of the main base metals used in the manufacturing process.
In fact, if current trends in raw materials' costs continue, alloy surcharges in the United States could be eliminated for most grades in the early part of next year. In the EU, it may take a little longer. Asian mills will not be immune from the impact of cheaper alloying elements. Their customers will be looking for lower prices.
Currently, the Stainless steelmakers have little prospect of raising existing selling values due to declining order books. However, MEPS are anticipating a big change in strategy by the producers over the next few months and into the New Year. Substantial reductions in output are likely, in an attempt to match supply and demand. This action has already been taken by ALZ in the EU and several mills in Japan and the US. Others will follow.
MEPS' optimistic standpoint on prices in the first half of next year is based on more equilibrium in the market at that time. It is in the hands of the steelmakers to transform the sentiment in this sector. The price scene now resembles a modern roller coaster. These may be exhilerating in fairgrounds but do not help the development of the industry.
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