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Stainless demand outlook uncertain

Sep 19, 2013 | 06:07 PM | Daniel Fitzgerald

Tags  stainless steel demand, stainless prices, Dennis Oates, Universal Stainless & Alloy Products, market consolidation, Markus Moll, Steel & Metals Market Research, SMR Stainles & its Alloys conference

NEW YORK — Stainless steel market participants remain wary about the demand outlook as the industry struggles to emerge from a period of destocking and low nickel prices.

Some delegates at AMM’s 27th Annual Stainless and its Alloys Conference in Chicago this week presented a grim picture when asked about future stainless demand and pricing.

"So many people think that the return in demand will come suddenly, but it will be slow considering how much damage was done. ... I think we’re about to enter another period of destocking. I’d say the prices only got a bump recently because we were coming out of summer," one distributor said.

"You’ve still got distributors out there acting like a bank, offering 30-day, 60-day, 90-day payment terms to attract business," one trader said. "Distributors keep discounting, thinking they’re going to get more business that way; but the guy making a stainless widget is still making the widget no matter what he pays. So they’re only hurting themselves."

Several delegates flagged up the likelihood of further consolidation in stainless production, including Universal Stainless & Alloy Products Inc. chairman, president and chief executive officer Dennis Oates, who was pressed about his company’s growth plans following the ramp-up of its North Jackson, Ohio, facility.

"Frankly, right now the market is not all that good. We have made a fairly sizable investment for a company of our size that we need to digest," he said. "I still think consolidation in certain sectors of our market is very compelling for a number of economic reasons and has got potential down the road."

Fiscal austerity in Europe and margin compression in the United States is more a "rightsizing" than a temporary lull, Steel & Metals Market Research GmbH (SMR) managing director Markus Moll said. "The crisis is becoming the new normal. Everyone is thinking back to 2006 when it was raining gold, but that was not normal. The normal is what we are having today, with OK volumes and lousy margins."

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