Stainless steel service centers and distributors are optimistic
that base price increases announced by producers last week will
gain traction in the market, but are wary of discounting that
they say is going on behind closed doors.
Service center sources
said stainless producers success in getting base price
increases to "stick" is largely dependent on whether any of the
producers break ranks and make special deals for their
"It occurs to me that
it will stick if they all stick together," one source said.
"What remains to be
seen is the behind-closed-doors discipline; as in,
will they go back to some deeper discounting for their
larger-volume guys, in which case (prices) might just erode
back to previous levels," a second source said.
Coil Americas was the latest to join a two-part base price
increase effective with Aug. 1 shipments, which will be applied
again for shipments effective Oct. 1 (
amm.com, Aug. 7). North American Stainless Inc.
(NAS) kicked off the move last week, followed by AK Steel Corp.
and ATI Allegheny Ludlum Corp. (
amm.com, July 30 and
The two-part approach
is likely to ensure that at least one of the two increases
takes hold in the market, sources said.
"When they do that,
theyre usually successful because the threat of the
second increase solidifies the first one. We did see the
increases start at NAS, which is a good thing, hopefully that
will legitimize it a little bit," a third source said.
"Its like your
dad saying youll get a spanking if youre home late,
but youll really get a spanking if you miss dinner too,"
the second source added.
A fourth source noted
that the timing of the increase is likely to ensure they are
incorporated in 2014 contract discussions.
"You can go with it
until you start losing orders, but my gut feeling is one of
these two (increases) are going to settle. We start negotiating
2014 contracts soon, so I think they wanted to make sure this
is out there and its in the discussion," he said.
"Were trying it, were putting numbers out there at
the higher price. I havent heard back yet on any of them,
but were not going to lose any orders against it."
Sources also agreed
that the increase was inevitable since raw material surcharges
for commodity-grade stainless steel have dropped for five
consecutive months (
amm.com, July 22).
"Every one of them
makes some profit on the surcharges, so if the surcharge keeps
dropping, theyll really take it in the teeth," the second