Raw Material Hikes Prompt Stainless Steel Recovery

The recent upturn in raw material values has spurred stainless steel producers to introduce price increases – in some cases, over and above the amount necessary to cover the rise in mill input costs.

LME nickel values have been on an upward trend, since early January. Nevertheless, the increase was insufficient to bring about an uptick in European alloy surcharges for austenitic stainless steels, in February. This, because costs for chromium, molybdenum and steel scrap fell, during the calculation reference period.

This means that the surcharges for nickel-bearing grades, in Europe, had decreased for seven consecutive months. During this time, nominal basis values – the difference between the effective price and the alloy surcharge – having plummeted in the first half of 2018, as surcharges soared, failed to recover in the manner that market participants expected.

However, while alloy extras dropped again in February, effective prices for austenitic flat products, in Europe, remained stable or, in a few cases, increased. This represents an upturn in nominal basis figures. Alloy surcharges will rise again, in March, and European producers are predicted to push for further price hikes, in excess of the changes to alloy extras. This turnaround has been anticipated for some time, as mills have been selling at values which were, clearly, not covering their production costs.

In the United States, the leading stainless steelmaker, North American Stainless, recently announced basis price increases, for bars and hot rolled plates, effective March 1. However, no such proposal has been made, at the time of writing, with regards to coil products. US producers have less requirement for price increases than their European counterparts, because trade measures, such as antidumping duties and Section 232 quotas and tariffs, have kept US domestic values at a relatively high level.

Chinese market prices, which tend to respond quickly to changes in raw material costs, took a positive turn, in February, following the Lunar New Year celebrations. Stainless steel producers in South Korea and Taiwan, achieved moderate hikes, for February contracts. Their intentions to seek further increases, in March negotiations, have already been indicated. Japanese market values have been stable, for many months. Local suppliers’ efforts to apply increases met with very limited success, in February. However, MEPS expects them to continue to press for price increments, in the coming months.