Stainless steel flat-roll hikes fail to stick

By Tom Stundza -- Purchasing, 4/16/2008

North American stainless sheet buyers appear to have forced producers to withdraw a 5% base price hike. Buyers tell Purchasing.com that purchases have been so soft that buyers are holding back on orders rather than accept higher prices. “True demand for stainless steel remains subdued,” agrees Mark Parr, analyst at KeyBanc Capital Markets in Cleveland in a note to clients. “At this point, the market appears to be struggling to absorb a 5% April base price increase on commodity grades.”

And that meshes with the latest buyer survey, which shows original equipment manufacturers (OEMs) have been fighting off the price-hike proposals because of weak demand. “Anybody who says we’re not in a recession obviously doesn't work in the manufacturing sector,” says one buyer. So, he and other buyers also have been arguing about stainless prices with service center suppliers who had accepted the 5% increases but haven’t been able pass them along. Atop all that, cold-rolled stainless import levels are up 15% year-to-date.

Inventory destocking at the service center link of the supply chain ended late last year and stockpiles are below normal, but in line with current demand levels, analysts report. “So, a near-term return to normalized profitability levels for domestic commodity stainless steel and select specialty metals players appears elusive,” says Parr, “given the current end market environment.”

Stainless steel purchasing in the U.S. dropped 14% last year despite strength in aerospace and energy end markets. So far this year, year-over-year buys are more than 20% lower than in 2007.