Stainless Steel Me

Ms Liu said that in the first quarter of this year, capacity utilization rates at Western stainless steel producers have been running at around 50% to 60%, with Chinese producers running at rates of over 80% during the same period. She added that for January and February, major Chinese stainless mills were running at 80-90% capacity compared with 60% to 70% in 2008, but output in March slipped lower owing to rising stocks and lagging demand.

Mr Heinz Pariser of Heinz H Pariser Alloy Metals & Steel Market Research forecast an even sharper drop in global production of around 17% in 2009, on the back of an 8.2% decrease in 2008. He estimated that destocking of stainless steel could reach 8 million tonnes from mid 2008 through the third quarter of 2009. The scale of this has never been seen before. It’s a big factor which will hopefully come back as fresh demand for 2010.

Mr Liu said that at a nickel price of USD 4.50 per pound, the London Metal Exchange cash settlement price for nickel was USD 4.44 per pound around 30% of the nickel industry was making losses. Although the producer response to slumping prices saw total output cuts hit 180,000 tonnes per year in 2008, rising to over 300,000 tonnes per year in 2009, more cuts were needed to bring the market into balance in the face of excess stocks.

She added that a combination of the drop in nickel prices and higher iron credits has, however, seen the supply of nickel units in the form of nickel pig iron fall sharply. Severe cuts in Chinese NPI production could see it drop to around 50,000 tonnes nickel content this year from 120,000 tonnes in 2008.

Mr Pariser forecast nickel consumption this year at 1.132 million tonnes, down by 11% YoY and rebounding to 1.328 million tonnes in 2010. But the price spike in 2006-2008 meant that nickel priced itself out of the market in certain areas. He added that “There are a lot of applications that simply disappeared.”

He added that “Only China is showing above-average growth. The EU, Japan and North America are showing negative growth, demand is shrinking.”