U.S. stainless steel market fundamentals have definitely been looking up in recent months, with at least modest growth in just about all of its major end-use sectors and expectations that this strength will continue, and even accelerate, as the year progresses.
While 2014 got off to a somewhat shaky start, largely due to weather-related issues, Jason Kaplan, senior manager for the pricing and purchasing service of IHS Inc., said things are definitely looking up now, citing moves by flat-rolled and long product mills to raise base prices.
There have been some big underlying changes in the U.S. stainless steel industry structure, according to Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa. Domestic shipments increased 12 percent from January through April compared with a 15-percent decline in imports--19 percent when factoring in the imports of semi-finished steel that were destined for Outokumpu Stainless USA LLC in Calvert, Ala., which has been slowly ratcheting up its semi-finished production.
Even with the U.S. gross domestic product shrinking 2.9 percent in the first quarter, its largest decline in five years, the domestic stainless steel market saw an overall 10-percent year-on-year increase in apparent consumption during the quarter. That included a 16-percent gain for long products and a 9-percent rise in flat products, with 8 percent of the overall increase coming from real demand as opposed to inventory restocking, according to Markus A. Moll, managing director and senior market research analyst for Austrias Steel & Metals Market Research GmbH.
Service centers burned their fingers so badly during the economic downturn that they are maintaining a strict level of inventory management, said Robert Cartman, a senior steel analyst at AMM sister publication Metal Bulletin. Even with mill lead times for flat-rolled stainless steel--even commodity-grade product--extending into October through December, depending on the mill, stainless steel distributors are happy to hold lean inventories, a fundamental change in their mindset, Cartman said. In fact, they only had about 2.5 months supply on hand at the end of May, he noted.
In recent years, imports, other than perhaps some light-gauge material, have not been a big issue, given their longer lead times. But even with the new Calvert mills capacity seen displacing some foreign product, there are concerns of greater import penetration, especially as U.S. stainless steel transaction prices increase.
The United States is an enticing market, especially with the Chinese economic growth rate down and Europe being slow to recover from its recession, said David A. Hartquist, counsel to the Specialty Steel Industry of North America.
Of particular concern is the potential impact on the U.S. market of a trade case filed by European steel association Eurofer against cold-rolled stainless steel imports from China and Taiwan, Moll said.
For the year as a whole, Plummer expects 3- to 5-percent underlying stainless steel demand growth followed by similar, or even slightly greater, growth in 2015.