Producers and service center executives say 2002 has been more challenging to predict than any other time in recent memory. They now expect no big swings in demand—up or down—for stainless flat-rolled through the end of this year. So, with stainless steel selling prices reasonably steady over the past six months, buyer feedback suggests spot-market prices will remain firm well through the final quarter.

Mac McAninch, president and CEO, Universal Stainless & Alloy Products, Bridgeville, Pa., comments: "The stalled recovery of the U.S. economy has resulted in lower than expected demand from the service center market. We do not expect these conditions to improve for the balance of the year."

Processing distributors handle about half of stainless supply and several service center executives interviewed don't expect much fluctuation in prices through the balance of 2002. This period of stability could prove to be highly beneficial to the supplier segments of the market. Buyers polled in September do report that they are "somewhat more comfortable" specifying stainless steels over competing materials for major long-term construction projects and product-manufacturing campaigns.

As open-market import volumes dropped early this year, supply tightened and the domestic mills made a number of attempts to raise the basis values of market prices. None proved very successful because order intake did not pick up sufficiently to support major base price hikes. As for plate, demand has remained depressed as few major projects are underway. The number of players in the market went up, thus increasing competition and keeping prices flat.

Market analyst Mark Parr at McDonald & Co. Securities in Cleveland, agrees that renewed attempts last month to hike sheet and plate prices didn't result in much success. Alloy surcharges may have risen a bit—but these tend to move up or down, depending on the level of nickel and cobalt prices on commodity exchanges. The base levels for stainless mill products, however, remain flat. Parr says the marketplace needs a much stronger demand environment before higher tags can become reality.

Most service center execs hope there will be sales improvement this autumn. However, real end-user consumption of flat-rolled stainless steel, which weakened last summer, has failed to recover. And, several domestic mills and distributors were stung by the mid-September news that Nippon Steel Corp. and Nisshin Steel Co. of Japan now will be supplying stainless steel products to Japanese-affiliated automotive parts makers in the U.S. through just two companies—J&L Stainless, a U.S. subsidiary of Luxemburg-based steelmaker Arcelor, and North American Stainless, a U.S. unit of Spanish steelmaker Acerinox.