Stainless flat-rolled prices tumble

By Staff -- Purchasing, 11/2/2000

Aggressive marketing action earlier this year by domestic stainless steel sheet producers to recoup profits lost when prices slipped last year may have backfired. Demand has slipped, as buyers are adopting a "buy just what's needed" attitude; so, spot-market tags have plummeted.

October-delivery spot prices for type-304 cold-rolled sheet of $1,655/ton (without surcharges) were 18% lower than the $2,020 price in April. September spot transaction prices for October-November deliveries of cold-rolled sheet type 301 of $1,605/ton are down almost 21% from $2,002 a quarter ago while type 302 dropped 15% to $1,665 from $1,955. Atop that, types 316 and 316L both dropped 10%.

Buyers report that type-316 plate at $2,065 or lower compares with a spot price of $2,300 in March. Some press reports contend that spot prices for type-316 stainless steel plate in coils have averaged $2,195/ton for the past six months. Purchasing's buyer surveys show an April-September average of $2,184-an average $2,065 in the third quarter, down from $2,300 in the second quarter.

"The producer mills' euphoria over record bookings in 1999's fourth quarter and 2000's first quarter has subsided," admits Lawrence Burr, president of Atlas Steel Products in Twinsburg, Ohio, a processor and distributor of flat-rolled coated and stainless steels.

"The market attempted had too much of a price increase too fast in previous quarters, so buyers who booked very early-before the higher prices kicked in or sourced offshore-now have plenty of metal on hand and haven't needed to buy at the higher prices," suggests Seth Young, president of Gulf & Northern Trading Co. in Vorhees, N.J.

"When orders became fewer and fewer this summer, mills grew a little more aggressive in chasing that remaining business and the pricing spiral began," Young says. Wayne Ferguson, president of Ferguson Metals Inc., a Cincinnati-based service center, agrees that "there is too much inventory, service centers are well stocked, and demand is waning." He says that "end-use activity has slacked somewhat; it's down across the board."

Imports, through the first half of this year, were up, however. Imports of stainless sheet and strip were up 19% to 230,303 tons through June, according to the most recent data supplied by the Washington, D.C.-based Specialty Steel Industry of North America.

The August survey of Steel Service Center Institute members indicated commodity-grade stainless steel inventories increased slightly from July, extending recent historical highs. Stainless shipping levels recovered only slightly compared to July, indicating demand patterns have gone fairly weak after a robust first half. Stainless materials on hand at ssci-member plants remained at 4.8 months of shipments, significantly above the 3.6 months averaged over the past five years. Analyst Mark Parr at McDonald Securities in Cleveland estimates there was 125,000-150,000 tons of price-depressing excess stainless supply in the system in September "that will need to be liquidated over the next several quarters."