Our March briefing reports about an increasing demand for stainless steel. To an increasing extent the mills are utilizing their production to an optimum. This is due to an adaption to their production capacity and thus a utilization of 70% is optimal for the mills.
At present the limits for the price development for nickel and molybdenum are tested in the upwards direction. Refilling of stocks, increased consumption in the process industry and a generally carefull optimism are all factors that form the basis for the price increases finally for a long time not only being based on speculation.
Mills – European mills have increased their stainless supply substantially in Q1/10 to cope with increasing order intake. Capacity utilizations reached levels of 70%. Both improved demand from end use segments and increasing orders from stock-holders, contributed to the positive development in the first months of 2010. Most European mills expect however a slight slowdown of production in the second quarter. In general, the market for cold rolled flat products is much better than for hot rolled products.
Profit Situation has started to improve in Europe. A number of mills (TK and Outokumpu in Europe) and distributors still reported losses in Q4/09. However, increasing market prices (higher alloy surcharges and base prices expected) and reduced costs will enable the mills to return to (more satisfactory) profits.
Distribution and stocks: after de-stocking in Q4, the market started to re-stock again in Q1 in expectation of a demand improvement, empty material pipelines and increasing raw material prices. But: it is again a moderate up-stocking activity. Most distributors prefer a conservative stock level planning after 2008/2009 experiences.
Industry Segments: better order intake for new projects and re-start of postponed projects will have a positive effect on the process equipment sector in 2010. Demand will climb particularly in HY2 due to a time lag between order intake and material flow. The further development in consumer durables, automotive and building & construction remains uncertain: there is only cautious optimism – many European buyers even remain pessimistic for their future business expectations. They will also remain hesitant with new orders.
Macroeconomics: in general, the growth dynamics for the European economy is still rather limited. 2010 will not compensate for drastic 2009 setbacks. The EU-commission expects an EU-27 GDP growth of only 0.7% for this year, which is again far below normal growth patterns.
Raw Materials: increasing demand for raw materials would wide initiated an upwards tendency in raw material prices. Nickel exceeded the 23,000 USD/t mark recently, whilst the extremely high LME stocks started to decline. It is expected that raw material price will continue to increase in Q1. The introduction of Mo at the LME (February) has had a major impact on the prices. Mo exceeded the 45,000 USD/t mark in early March.
[Metal Supply news]
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