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Stainless steel demand falling: distributors

Keywords: Tags  stainless, stainless flat-rolled, nickel, Markus Moll, MSCI, Thorsten Schier

NEW YORK — Flat-rolled stainless steel distributors have seen demand fall following a solid start to the year.

"Demand is very weak, very disappointing. It’s been down pretty much the past month," one mid-Atlantic stainless steel service center executive said.

"It’s not completely in the doldrums, but I wish we were busier," a service center executive in the Midwest added.

The demand slowdown is borne out by the latest figures from the Metals Service Center Institute (MSCI), which show a 9-percent decline in stainless service center shipments in March to 156,700 tons after a 5.9-percent month-on-month gain in February.

Year-to-date stainless shipments stood at 463,200 tons, down 2.6 percent from the same period a year earlier, according to MSCI figures.

Markus Moll, managing director and senior market analyst at Austria’s Steel & Metals Market Research GmbH (SMR), said in a recent presentation that U.S. stainless market growth is set to slow this year after an explosive rise in 2011 as the market has almost reached pre-recession consumption levels (AMM, March 27).

Service center sources couldn’t point to a single factor, such as the recent drop in nickel prices, to explain the falloff, citing instead a concerning fall in real demand.

Stainless customers usually hold off on buying when nickel prices decline as they try to time the bottom of the market, but sources said that’s not the case now.

"Nickel dropping shouldn’t really impact the market at this point, as most people already thought it had reached the bottom," a southern stainless service center source said.

The cash nickel contract on the London Metal Exchange has averaged $8.17 per pound in the current surcharge calculation period, down 7.1 percent from $8.79 per pound the month prior, prompting sources to expect lower stainless surcharges for May.

"The drop should be a little shy of 6 cents (per pound) on 304 and almost 8 (cents per pound) on 316," the southern purchasing manager said.

But even the anticipated lower extra—which makes up almost two-thirds of the sales price on commodity 304 stainless—isn’t enough to lure most distributors into buying more material forward.

"Everybody is still cautious, cautious, cautious," the purchasing manager said.

Stainless service center inventories in March stood at 391,600 tons, about 2.5 months’ supply, down 11.9 percent from February and the lowest level recorded in 15 months, according to MSCI data.

Even with end-user demand seemingly slowing, most distributors said mills were still holding the line on recent price increases, but some said that discounts could be had for larger tonnages.

"There’s been nothing official, but I hear that there’s some dealing going on for tonnage commitments. That gives me some ability to negotiate against the increase," the purchasing manager said.

Lead times between producers vary, sources said, with one foreign-owned mill booked out into late June while other mills are still said to have May production available, according to sources.

Imports remain competitive, sources said, especially in light of the recent price hikes.

"Any time you have a base price increase, it makes imports that much more attractive," the southern service center source said.

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