***SPOTLIGHT: Roldan fire racks up the tension in tight stainless steel long products market

Acerinox has declared force majeure on shipments of hot rolled products from its Roldan long products facility in Ponferrada in Spain after a fire on November 20 seriously damaged the plant’s hot rolling mill.

Acerinox has declared force majeure on shipments of hot rolled products from its Roldan long products facility in Ponferrada in Spain after a fire on November 20 seriously damaged the plant’s hot rolling mill.

Roldan’s finishing shops were unaffected and Acerinox is insured against the effects of the fire, including loss of profit. But the damage caused could disrupt deliveries from the mill for months.

Acerinox has declared force majeure on all deliveries of hot rolled products from Roldan, which is able to produce 200,000 tpy.

“We have communicated to our customers that deliveries of stainless steel hot rolled long products will be delayed,” a company spokesman told MB.
Stockholders told MB the plant has already cancelled some orders for wire rod, and has delayed other shipments.

“They said we will get a percentage of our bright bars and angles in the first quarter,” said one. “All other orders are pending, waiting for more news.”

“Roldan cancelled our wire rod orders and we are now trying to buy elsewhere as we had already sold a lot of that material,” said another.

In order to avoid more disruption, Acerinox is exploring whether shipping material from its North American plants will be possible.

The company will also send some products from its plant in Campo de Gibraltar, which produces stainless steel flat products, to the Roldan plant.

But production at the hot rolling mill will not restart until sometime in the first quarter of 2011.

And news of the fire will pile more pressure on an already stretched market. Stainless steel longs producers claim their order books are out to six, nine or even twelve months.

“We have already seen the first increases from some mills,” one trader told MB.

Most mills were slow to bring capacity back online last year. Now, even though demand from some sectors remains poor, demand is exceeding supply.

Producer base prices for grade 304 bright bar deliveries this month rose to €1,140-1,160 per tonne following the news, pushing end user prices for the same material delivered in December to €3,500-3,600 per tonne, up from €3,300-3,600 last month.

Base prices for first quarter deliveries rose even more with mills closing orders at €1,280-1,300.

And, if the effects of the fire continue to disrupt deliveries from Roldan, more increases will soon come. So, for the time being, producers are doing well.

While demand from some sectors like construction is still pretty poor, demand from automotive manufacturing companies is starting to grow. Demand from machine manufacturing and the chemical sector is picking up as well.

Stainless steel long products mills have managed the past few years well. Having kept output under tight control, many mills are still benefiting from end-users restocking.

“I know component makers who bought nothing in 2009 and just tapped into their stocks,” said Centrinox md Fausto Capelli, who also credits an efficient distribution network for the relative success of longs producers compared to their counterparts in flat products.

The Roldan fire will keep prices steady for the next few months at least, most market participants agreed. But, in the longer-term, the industry is still precarious.

Mills might have full order books well into 2011. But, if the tide starts to change, many of them are easily cancelled — many buyers are yet to fix prices and terms, according to market participants.

“This means they may be cancelled at any time,” said Steel and Metals Market Research (SMR) md Markus Moll.

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