Posco stainless steel production

Although most areas have recorded a moderate, though gradual, economic recovery since the darkest days of the  Global Financial Crisis. However, there has been no significant upturn in the demand for stainless steel, especially in the West. Producers all over the world are now having to curb their output in an attempt to control inventory levels and prevent prices from crashing again. There were definite signs of improvement in the US in the early part of this year. Indeed, a recent report from the Specialty Steel Industry of North America showed that stainless steel consumption in the first quarter of 2010 had risen by nearly 50 percent, year-on-year. Activity has clearly slowed since then. North American Stainless is now producing at less than half of its maximum capability and delivery lead times are short. AK Steel and Allegheny Ludlum, as well as NAS, are quoting less than two months for delivery of type 304 cold rolled coil. ThyssenKrupp’s new rolling capacity is coming on stream at a lean time for orders. Market participants are expecting some pick up in demand after the summer vacation but few are predicting a sustained upturn into the winter.

Japanese customers are no longer purchasing in anticipation of higher prices, yet supply chain stock levels are increasing. The mills are said to be considering discounted pricing to stimulate sales and NSSC has stated that it will tailor its output to consumption. Weakened demand has seen inventories in South Korea climb to their highest mark since September 2007, according to the Korea Iron & Steel Association. Despite this, the country’s main primary stainless steel producer, Posco, has no plans to cut production at present.

Taiwan’s two major stainless steel makers continue to limit output as a result of poor sales tonnages. Tang Eng is running its Kaohsiung works at around 60 percent of its capacity, while Yusco’s crude stainless outturn for July will be 10,000 tonnes down on the May figure. Inventories throughout the supply chain in China have grown as production continued apace over the past couple of years. Buyers are now exercising caution. Mills including Jiuquan Iron & Steel have announced their intention to reduce output, while industry leaders Shanxi Taigang and Baosteel Stainless will take maintenance breaks during July and August.

There is something of a mixed picture in Europe. Economies in the south of the continent continue to struggle. Stainless suppliers there are also competing with cheap imports from the Far East. Some countries further north, particularly Germany and Sweden, are showing very promising signs of recovery. Demand across the region, though, has slowed seriously in recent weeks. This will be offset, of course, by the steel makers’ traditional summers holidays of around 4-6 weeks. However, some of the financial stimuli that helped to sustain activity in Europe are starting to disappear. Several car scrappage schemes have finished and some governments are now looking to cut spending and reduce their budget deficits. Thats why production cuts may need to be extended before rel demand is expected to return in 2011 to keep prices at a profitable level.

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The figures announced by Outokumpu the Finish stainless steel giant who recently announced worse than expected figures, are for European deliveries of stainless steel in August 2010. As summer shutdowns approach they may be extended shut downs to try and maintain price levels, better news for producers in recent weeks as Nickel has rallied stronger again. Ferritic prices still remain strong due to high Chrome prices filtering through.

A  snapshot of  the surcharges announced today are listed below:-

1.4301 (304) 1565 EUR /1300 GBP

1.4404 (316) 2484 EUR / 2062 GBP

1.4016 (430) 495  EUR / 411  GBP

The figures announced by Outokumpu the Finish based stainless steel supplier for European deliveries of stainless steel in July 2010. The falls follow a reduction in demand for stainless steel worldwide and lower commodity prices. All eyes are now on the global economy to see if there is to be a double dip recession or if this is just a temporary correction after several price increases.

A  snapshot of  the surcharges announced today are listed below:-

1.4301 (304) 1633 EUR /1369 GBP

1.4404 (316) 25288 EUR / 2170 GBP

1.4016 (430) 482  EUR / 405  GBP

The British stainless steel advisory (BSSA) is launching an initiative to find out exactly how the less well known grades of stainless steel are used. There are two main purposes:
1) Obtain interesting stories from end users about why the particular grade was used
2) To simplify the standards for stainless steel by identifying those grades which no-one ever uses where there are usable alternatives

The European standards for stainless steel list 187 grades of stainless steel across a wide range of products. It is no wonder that many end users are completely bewildered by the large number. Some engineers use the mechanical properties to design some equipment, only to find that the Purchasing Department can’t actually obtain any, at least not within a sensible timescale.  At the end of the Gradespotting project, it is hoped that there will enough evidence to allow a considerable simplification of the grade list which will benefit all parts of the supply chain.

It is taken for granted that 304/304L (1.4301/1.4307), 316/316L (1.4401/1.4404) and 430 (1.4016) are well known enough not to warrant any special attention. Any other grade can be the subject of a “Gradespotting Story”. Stories will appear in the leading magazine for the UK stainless steel sector – Stainless Steel Industry. The most interesting story in each month will win a free place at one of the BSSA’s Starter Workshops plus a free copy of Understanding Stainless Steel.

Please send any suggestions for a story to: ssas@bssa.org.uk

• Austenitic cold rolled products 40 GBP
• Ferritic cold rolled products 25 GBP
• Continuously produced plate 35 GBP
• Quarto Plate 40 GBP

This follows a similar announcement from German based Thyssen krupp who report ” Thyssen Krupp Nirosta are experiencing a significant improvement in our order intake with the result that lead times are extending due to an improved level of capacity utilization on all three of our production units in Germany.” The note goes on to say increases similar to those above from Acerinox will be effective from the 1st of June.

This is the first sign that the mills are confident of real demand increasing and that prices will remain strong for some time to come. Although Nickel prices have eased slightly the outlook remains for higher price levels, longer lead times and more limited availability for the stainless steel market.

US Steel company AK Steel said that it will increase base prices for all 200, 300 and 400 series flat rolled stainless steel products by 6% to 9%, depending upon the grade and product form, effective with shipments on May 30, 2010.

AK Steel said this increase will be achieved through a reduction in the functional discount of two percentage points for cold rolled and hot rolled products.

Base prices of automotive exhaust grades will increase by $.04 per pound. All surcharges for stainless steel which increased recently will remain in effect.

A  snapshot of  the surcharges announced today are listed below:-

1.4301 (304) 1752 EUR /1552 GBP

1.4404 (316) 2790 EUR / 2472 GBP

1.4016 (430) 400  EUR / 354  GBP

Stainless steel transaction values are rising steeply in most markets around the world. Producers and stockists will hope this is an opportunity to secure the profitable type of business that has been so hard to find since the onset of the global financial crisis. Now, we should examine the forces that are driving these higher prices and ask for how long they will be sustainable.

Nickel figures on the London Metal Exchange have risen more than most observers anticipated during the past two months. In part, this may be due to speculators, who have found metals to be a sound investment in recent times, while returns from some other parts of the money markets have been poor. On the other hand, there are some fundamental factors connected to the stainless steel industry. Scrap containing nickel and chromium is in short supply. Arisings from manufacturing have reduced during the global recession and collections of end-of-life materials have slowed due the depressed prices available during the last two years. Moreover, underlying demand from the developing markets, particularly in Asia, continues to increase.

There are other points supporting the current escalation in stainless selling values. On the supply side, the mills can point to a number of increased input costs. Furthermore, many producers have been selling at or below break even levels for some time and are now trying to ensure a decent margin. On the demand side, most supply chain participants need to replenish depleted inventories, while stockists and end-users alike may attempt to place orders in advance of anticipated further hikes.

However, most of the factors mentioned above will turn around sooner or later. Global nickel stocks are comparatively high, potential supply exceeds forecast consumption and institutional investors could change their strategy and pull out of metals at any time. Whilst a gradual advance in stainless consumption is anticipated, we have limited reports of notable improvements in underlying demand, as yet. The summer holiday period in Europe and North America traditionally signals a drop-off in activity and, unless manufacturing operations pick up spectacularly, it will be difficult to maintain stainless transaction prices through this time.

On the back of improved demand and two year high for nickel prices have rallied but have they rallied too much, what is really driving the market. Over the last three months stainless steel prices have risen around 25% at the beginning of the year prices where around 1950 euro for grade 304 stainless, April deliveries are now over 2500 euro with higher prices forecast for May. Demand for the domestic markets in China has certainly increased and Chinese mills are aggressively increasing prices on the back of this demand. In Europe where monthly surcharges are announced linked mainly to the prices of Nickel, Chrome and Molybdenum it’s easy to see where prices are going the following month. Although domestic demand has risen some of the key drivers are from distributors keen to beat the increases, this isn’t real demand mainly re-stocking and seeing the opportunity to make some money on surcharge rises.

In the longer term if you look at the fragile economies of Europe and the US with inflation very low how can consumers accept  price increases of over 25%. In reality they can’t and won’t, yet in many domestic products stainless steel will make up over 80% of the costs. With a mini commodity boom on the LME traders are getting richer but once the mills increase production of stainless steel and more nickel is mined will prices remain so high? We will have to see is this a real boom or will the prices go bust again.