Nickel price slide will cut stainless prices, soon
By Tom Stundza -- Purchasing, 8/1/2007 12:56:00 PM
The first question isn’t “whether nickel is getting cheaper?” but “how low will nickel’s price fall?” And that brings up the second buyer-vexing question of “when will stainless steel start its slide?” After all, two-thirds of all processed nickel goes into stainless steel.
Global stainless steel companies have a surprisingly similar message: Short-term order flow has dried up as service centers are concentrating on eliminating stainless steel inventories that are overvalued after last month’s 25% slide in world nickel prices. Also, OEM buyers are ordering only what is needed to fill holes in in-house stocks. "Stainless steel and nickel consumers are using stockpiled inventories in an attempt to limit their exposure to metal prices and benefit from more favorable prices later on,” according to the French metals and mining group Eramet.
London Metal Exchange (LME) nickel averaged $15.15/lb in July, down from $18.91 in June, but actually closed the month selling at $14.31 on July 31. Goldman Sachs expects prices to retreat all the way to $11.34 in coming weeks.
“We are seeing a sharp adjustment in the stainless stocks cycle and until it has been completed—the best guess from the producers seems to be towards the end of the current quarter—nickel stocks are expected to keep rising and prices to remain under (downward) pressure,” says the subscription-only Metals Insider newsletter.
Yet, the average price of stainless steel sheet (cold-rolled, Type 304) actually increased in North America in July to $5,828/net ton, according to Purchasingdata.com. However, United Kingdom steel consultancy MEPS (International) Ltd. tells customers today that “Western stainless steel producers of strip mill products have temporarily abandoned their traditional basis plus surcharge price mechanism for selling their material. Most EU and U.S. mills are now quoting only transaction prices.”
MEPS is estimating stainless 304 now is selling at $5,757 in the U.S. and predicts further slippage into the fourth quarter. Likewise, Purchasingdata.com has revised its third quarter (July-September) stainless 304 forecast to $5,432/ton from previous projection of $5,517. And, if nickel keeps falling toward $11/lb, the new fourth quarter average could be as low as $3,500 or so (rather than $5,500 forecast earlier by Purchasingdata.com).
Note: Outokumpu of Finland, Acerinox of Spain and Universal Stainless of the U.S. all say prices are too high and sales are so weak that production cutbacks of standard-grade stainless will occur or continue in this third quarter. Production cutbacks also have been reported in Asia.
Also see: Nickel-based steel buyers investigate material substitutes
And, Nickel prices drop on demand slump
Now Playing: 