GLOBAL STAINLESS OUTLOOK: Asian prices to weaken in Q1; strong demand in EU, US

Stainless steel prices are expected to weaken in Asia on lower demand during the first quarter of this year, while prices in Europe and North America are likely to continue to be supported by strong demand.

Asia to see price drop
Asian stainless steel prices are expected to drop in the January-March quarter amid soft demand.

In the first quarter, China and some other major Asian stainless steel market participants, including South Korea and Vietnam, will be out of the market for roughly one week from February 15 onward while they celebrate the Lunar New Year.

Trading activity is expected to be low in February, with some participants expecting prices for grade-304 stainless steel cold-rolled (CR) coil to drop to $1,900 per tonne cif major East Asian ports, compared with $2,100-2,200 per tonne cif at the end of December 2017.

Besides the weak demand, high production is also putting pressure on prices.

Crude stainless steel production was 19.67 million tonnes in January-September 2017 in China, up by 8% year-on-year, according to data released by the China Stainless Steel Council (CSSC).

Output of 300-series grade stainless steel increased by 16% year-on-year to 10.79 million tonnes in the same nine-month period, the council added.

“There was no news about any sharp cuts in production due to mill maintenance, so production should have remained at high levels in the last quarter of 2017 and in the first quarter of 2018,” a trader in Eastern China said.

Meanwhile, Tsingshan Group Holdings is actively producing hot-rolled (HR) stainless steel at its two plants in Indonesia and is exporting the product mainly to other Asian countries, Metal Bulletin understands. Tsingshan’s Indonesian mills have total capacity for 2 million tonnes per year.

Mainland China imported 185,000 tonnes of stainless steel slab during January-October 2017, 11 times more than the 15,000 tonnes importing during the corresponding period in 2016, according to the CSSC.

Indonesia-origin products constitute a large proportion of the total import volume, according to market participants.

Taiwan imported 22,722 tonnes of HR stainless steel from Indonesia in November 2017, the council said.

“[The Tsingshan mill in Indonesia] will maintain a high production rate in the first quarter of 2018 – at least, it will be no lower than in the October-December quarter,” an analyst in Shanghai said.

But volatility in the nickel price has created some uncertainty among market participants about the direction for stainless steel prices over January-March.

“If nickel prices on the London Metal Exchange break [above] $13,000 per tonne, stainless steel prices may follow suit,” a trader in Taiwan said.

The LME three-month official nickel bid/offer spread was $12,470/12,490 per tonne on January 16, having fallen from $12,940/12,950 per tonne on January 10, its highest level since June 2015.

Healthy European demand expected in Q1
Stainless steel demand in Europe is expected to remain strong throughout the first quarter of 2018, with lengthening lead times at mills for long products leading to the possibility of base price rises.

“Long product lead times range from the end of March to mid-May for some sizes, and most EU mills are fully booked for the first quarter of the year on strong demand,” a distributor in the Nordic region said.

Metal Bulletin’s weekly price assessment for grade-304 bright bar was stable week-on-week at €1,000-1,040 ($1,225-1,274) per tonne delivered on January 12, but mills could push through price rises in the coming months, according to market sources.

“Stock levels are sufficient for most product forms,” Danish stainless steel distributor Damstahl said in its monthly report for December 2017. “For bright bars and some other product forms, however, supply is tight, which is partly due to the long delivery times from the stainless steel mills.”

While alloy surcharges for January deliveries of both flat and long stainless steel products fell month-on-month, surcharges for February deliveries of material are expected to rise on strong nickel prices, overcoming a quarter-on-quarter fall in the European high carbon ferro-chrome benchmark.

“Base price rises are possible [for flat products] but I don’t think they will rise unless the alloy surcharge falls sharply,” one trader in the Benelux region told Metal Bulletin.

Metal Bulletin’s weekly domestic base price assessment for 2mm, grade-304 CR stainless steel sheet narrowed downward by €10 per tonne to €1,060-1,120 per tonne delivered in Northern Europe on January 12, compared with €1,060-1,130 per tonne delivered on January 5.

“There may be a small upward movement in European stainless base prices. That said, any increase too high would be likely eventually to attract greater import competition,” Metal Bulletin Research analyst Robert Cartman said.

“European prices are already on the high side in comparison to some of the values coming out of Asia. In addition, the euro has strengthened against the currencies of most major stainless-producing countries over the past year, making imports increasingly competitive for European buyers,” Cartman added.

US outlook stable to positive
Stainless steel demand in the United States is also expected to remain stable or positive in the first quarter of 2018, according to market participants.

Base price rises on stainless cold-rolled sheet and bar products in January have mostly been accepted so far. Yet, American Metal Market’s latest assessment of domestic grade-304 cold-rolled sheet dropped by $0.035 to $1.215 per lb ($2,679 per tonne) fob mill on January 10, due to falls in the alloy surcharge price offsetting base price increases.

“[The market] is strong demand-wise going into the first quarter,” a US East Coast trader source said, adding that another base price increase would be possible in March or April.

But a US Midwestern distributor countered that a second increase in the first half of 2018 would “just be detrimental to the market.”

“If nickel and chrome prices rallied, maybe [a price rise would be possible], but otherwise we’re just in steady business,” he said. “There is nothing crazy going on [in the market] that warrants a base price increase.” He noted that current lead times are at historically normal levels of around four to six weeks.

The recent joint venture by major US stainless producer Allegheny Technologies (ATI) with an affiliate of China’s Tsingshan Group, to produce 60-in wide stainless sheet in North America, still worries some of the major domestic competitor mills. They are concerned about its effect on supply and prices, distributor sources said.

“[The possibility of] ATI rolling Indonesian material is a concern for some people,” the Midwestern distributor said.

Tsingshan will supply ATI with ready-to-roll slabs from its Indonesian operations, which will be hot-rolled into coil at ATI’s hot-rolling and processing facility in the US state of Pennsylvania, and finished into stainless sheet at ATI’s direct roll annealing and pickling line in the same state.

“How cheap will that feedstock [from Tsingshan] be?” a US West Coast distributor asked. “That is the big question. Will they get the quality right?”

US imports of stainless steel blooms, billets and slabs from Indonesia jumped to 18,903 tonnes in November following at least 14 consecutive months of zero imports, according to license data up to November 27 compiled by the US Commerce Department’s Enforcement & Compliance division.

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