NORTH AMERICAN AVERAGE STAINLESS STEEL PRICES - LATEST FORECASTS FROM MEPS

"Transaction prices for grade 304 products are forecast to decline further in the short term due to falling raw material costs. Type 316 figures are expected to show a substantial drop of over $US2000 per tonne in November and December 2008 as molybdenum values plummeted in October and November. This is predicted to result in reduced purchases from domestic mills over this period as buyers wait for lower prices. The value of inventory currently held in stock by service centres will be adversely affected by the large decrease. Consequently, many of them are likely to attempt to sell as much material as possible before the financial year end, perhaps at prices considerably below mill offers. Output curbs by the steel producers could help to limit the oversupply.

The monthly average nickel cash value dropped again in November 2008 as daily figures struggled to rise above the $US10000 per tonne level. The main constraint for price is the high inventory held in LME warehouses, which continued to rise over the past four weeks and now stands at above 60000 tonnes. This will add further downward pressure in the short term. Many small and medium sized producers claim that current prices are too low to cover costs. Some have been forced to halt production. These supply cuts could help to stabilise nickel prices. A modest recovery in cash values is expected for the first half of 2009 as a result of a pick up in world stainless steel demand on the mills. Nickel prices could then begin to fall, once again, as consumption weakens over the summer 2009.

In 2009, falling chromium costs should be offset by rises in nickel and scrap values. Reduced inventory levels, as a result of severe de-stocking in 2008, are expected to lead to increased buying activity after the Christmas period 2008. This is likely to push stainless prices upwards during the first half of 2009. However, due to the ongoing economic crisis and credit restrictions, these advances are forecast to be only modest. Selling figures for all products should remain below the November level. A downturn in transaction values is then envisaged for the final quarter of 2008 due to seasonal factors."

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