MEPS – EU April stainless prices up 74% year-on-year

KUALA LUMPUR: Stainless steel prices have climbed steeply in the past 12 months, due mainly to the higher cost of raw materials, most notably nickel, according to the latest steel review dated May 5 of MEPS (International) Ltd.

MEPS, a UK-based global steel sector consultancy, also identified better demand post recession as another contributor to the higher stainless steel prices.

The London Metal Exchange cash monthly average price for nickel for March 2010, at US$22,446 (RM72,511), was 131.6 % higher  than a year ago.

MEPS said since beginning 2010, major hikes in all raw material costs have led to soaring alloy elements in stainless steel prices. Nickel and molybdenum values have continued to climb beyond all expectations, while contract figures for ferrochrome have risen alarmingly.

The same was true of iron ore, which, while not a direct ingredient in stainless steel, would have influenced carbon steel scrap values.

Meanwhile, both ferrous and stainless scrap have been in relatively short supply, as arisings from manufacturing have reduced during the economic downturn and collections of end-of-life materials depressed by low prices.

MEPS attributed the final element in the recent stainless price rise to a strategy of the producers. “Most have attempted to keep output in line with demand. Furthermore, after an extended period of unprofitable operations, the mills have sought to maintain a reasonable margin in their selling values.

“However, the rapid climb in transaction figures in many markets has not been supported by any significant upturn in end-user consumption. Participants in the stainless steel supply chain have been happy to see prices trending upwards.

“Purchasing has been stimulated, as stockists speculate on rising inventory values and end-users buy early to minimise input expenditure,” said MEPS.

The costs of stainless steel and its ingredients, MEPS noted, could not continue to grow without a substantial pickup in demand. Market players, it added, were controlling their stock levels and nervously anticipating the point at which prices would start to fall.