Stainless steel prices are on the increase in June. As far as this market is concerned, it appears as though the Covid-19 pandemic has had little impact so far, with prices on the most common grades of stainless steel just 2-4% lower than they were at the turn of the year in most markets.

Even in Asia, a region often talked about in terms of oversupply, particularly since trade barriers have been erected in most regions of the world over the past few years, prices on some products are above levels seen back in January following a slight revival in Chinese demand in recent weeks.

In the absence of much general support from demand, however, price increases have been almost entirely driven by changes in raw material costs, which stainless steelmakers have in turn passed on to consumers.

Both chrome and nickel prices are up by around 10% since their late March/early April lows and these movements have been feeding through to stainless steel prices. Supply cutbacks and issues with supplying both chrome and nickel to consumers since lockdowns were implemented in various countries have supported raw material prices. But with lockdowns now being eased, we believe that raw material prices are likely to weaken as the year progresses, particularly since demand has shrunk and is likely to remain subdued.

But while stainless prices are now relatively unchanged since the beginning of the year, the pullback in demand is likely to hit stainless steelmakers in other ways. Although most of them continue to operate, capacity utilization has fallen. In Europe we would expect utilization during the second quarter to be some 20% lower than year-ago levels, for instance. And, while alloy surcharges will increase in June, producers may find themselves having to discount the base price component of prices again to maintain their share of a diminishing market.

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