Low Asian stainless steel import prices ‘prohibit EU base price rises,’ Acerinox says

The large price gap between European and Asian prices for stainless steel is making it difficult to raise EU base prices, according to Spanish stainless producer Acerinox.

“Higher European domestic prices would only attract more imports from Asia right now,” Acerinox chief executive officer Bernardo Velázquez said late last month.

Asian stainless steel prices have remained largely stable so far during the January-March quarter, amid strong nickel prices and despite soft demand.

Metal Bulletin’s assessment of prices for benchmark 304 stainless 2mm trimmed cold-rolled coil (CRC) was $2,170-2,260 per tonne cif East Asian ports for the week ending Wednesday March 14. This was down by $65-90 per tonne from $2,235-2,350 per tonne cif a week earlier.

In comparison, Metal Bulletin’s overall transaction price, which includes base prices and monthly alloy surcharges, for similar material produced and delivered in Northern Europe was €2,353-2,453 ($2,913-3,037) per tonne on March 9.

This was up from €2,300-2,431 per tonne on January 5, on higher raw material costs.

“Inventories in Germany are at a very healthy level. They were below the three-year average of 60 days in December 2017 after high deliveries in the fourth quarter of 2017,” Velázquez said.

“The market fundamentals and consumption are good in the first quarter of 2018 and our order book is growing,” he added.

In December 2017, inventories in the major Chinese stainless markets of Wuxi, in east China’s Jiangsu province, and Foshan, in south China’s Guangdong province, were below the two-year average of around 290,000 tonnes, Acerinox said.

Acerinox does not expect its earnings before interest, taxes, depreciation and amortization (Ebitda) for the first quarter of 2018 to surpass its performance in January-March 2017, when earnings jumped almost five-fold on high raw materials prices.

“We foresee stability, which is very good, but we will not have a boom like last year,” financial director Miguel Torres said.

Acerinox’s Ebitda rose to €489 million ($605 million) in 2017, up from €329 million in 2016.

Graphite electrode costs are leveling off and will eventually go down, Acerinox said.

Spot and annual contract prices for graphite electrodes in 2018 have risen sharply year-on-year, amid a supply shortage of needle coke - a premium-grade, high-value petroleum coke, which is used to make graphite electrodes.

“The price could now be around $6,000-8,000 per tonne for graphite electrodes, but they were more than $10,500 per tonne,” Velázquez said.

“All of a sudden [last year] there was talk of procurement at $20,000 per tonne. I know of a case where one person bought at $30,000 per tonne, but we didn’t do that as we have annual and long-term contracts,” he said.

“We can offset these costs with improved efficiencies, so we’re less concerned about the consumption of electrodes,” he added.

Finnish stainless steelmaker Outokumpu lost some market share among distribution and automotive sector customers over October and November 2017, after introducing an extra charge of €30 ($37) per tonne for graphite electrodes in late September 2017, it said on January 31.

“Some of our competitors decided to implement an electrodes surcharge and they failed. Today, this surcharge is not being applied, as far as I know,” Velázquez said. “You cannot have a surcharge for every cost – this is included in the margin and the base price, so we have to fight to increase base prices.”

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