Excess Production Capacity Undermines Stainless Steel Prices
Excess Production Capacity Undermines Stainless Steel Prices
Stainless steel prices continue to show few signs of recovery. Selling values, in Europe, have been below producers breakeven levels since a collapse in transaction figures, and the widespread adoption of effective pricing, in the summer of 2018.
Moderate increases, in excess of rises in alloy surcharges, were reported in the ea rly months of this year. Now, the prospect of falling raw material costs, in combination with mediocre demand, is applying negative pressure to nominal basis figures.
Transaction values are also softening in the Far East, where activity is subdued, while production capacity continues to expand.
Section 232 action, in the United States, led to an immediate rise in domestic stainless steel prices, when first introduced. Since then, however, transaction values have fallen back to a level that is more in line with international markets.
The European Commissions safeguarding measures were planned to prevent a flood of imports, in the wake of the US governments actions, and have had little, if any, effect in boosting local prices, in the EU.
Market participants might expect a pricing boost from the value of one of stainless steels key raw materials, nickel. LME nickel stocks are at their lowest point in more than six years. Furthermore, with demand for nickel growing, due to expected consumption in the manufacture of batteries for electric cars, a deficit in supply of the metal is predicted, in the coming years.
Commodity prices, however, are influenced by a complex range of factors, beyond the market fundamentals for the particular material. It is in this context that nickel values are, currently, quite becalmed.
The main negative factor affecting stainless steel selling values remains production overcapacity. Producers in the established steelmaking regions have struggled to fill their schedules, in recent years. Now, with substantial new production capability coming on stream in countries including India, China, and Indonesia, it is difficult for sellers to make the case for increasing prices.
