Stainless prices are feeble, too

By Staff -- Purchasing, 3/8/2001

Stainless steel sheet prices have been weak for some time; even the alloying surcharges have come under price-cutting negotiations. Analysts note that stainless sheet spot prices actually are 8% lower than a decade ago. Reason: "New capacity has been added faster than the markets can absorb it," says analyst John Anton at Standard & Poor's DRI in Washington. He points out that a short-lived price rally in 1999 was followed by a steady decline-right into early 2001.

Anton projects that stainless steel mill products will drop by almost 6% this year, taking the annual average for Type 304 sheet, for example, to $83 per hundredweight (cwt) from last year's average $88/cwt. (Note that while the first quarter's average has been about $74/cwt, some "special negotiations" have resulted in sales as low as $68, buyers report.)

Supply of stainless steel sheet in the U.S. is expected to be marginally lower this year from the 1.95 million tons of last year, as imported tonnage is expected to slide from the record-high level of 414,000 tons in 2000. However, sales to the automotive sector will fall, and shipments into other key markets-construction, machinery and food service equipment-suddenly are uncertain. Few market analyses expect stainless sheet and strip demand to reach the 1.69 million tons of last year.

"In a nutshell, the U.S. market is depressed, inventory levels are very high, and sales prices continue to tumble," says analyst Chris Sharp at MEPS (Europe) Ltd. in Sheffield, England. She notes that competition for orders "is extremely fierce" because both service centers and mills have high inventories. Cold-rolled sheet consumption is very weak, especially now that the automotive sector is slowing down, she says, reporting that producers had to trim price offers for austenitic grades by an average 3% in the first quarter to book orders.

Seth Young, president of Gulf & Northern Trading Co. in Vorhees, N.J., agrees there continues to be too much steel in the marketplace, especially since early-2001 demand has softened. And that's why stainless sheet Type 304 spot-market prices in February slipped to $72.75/cwt from $73.90 in January. J.T. Wright, vice president of marketing at Reynolds Aluminum Supply Co. in Richmond, Va., agrees that "it is a highly competitive market environment." He and other stainless sheet sale personnel agree that buyers are pushing mills and service centers on prices. "By and large, it isn't a bad market," says Wright, "but you have to convince your customer your price is a good price."

What concerns sheet marketers is that the first quarter usually is the best sales quarter, but not this year. "It is kind of surprising," says Wayne Ferguson of Ferguson Metals Inc., a Cincinnati-based service center. "There's usually at least stability in the first quarter. It hasn't occurred yet. Prices are really down and the slide hasn't stopped."