The view from where I sit
Focus on Stainless Steel
One would not argue that the UK stainless steel market remains somewhat fragile, and we forecast little change throughout Q4. Certain sectors are still performing well and holding up, however, the majority visibly below historical expectations.
Our take on things at this time is that During Q3, the lack of market confidence coupled with a falling Nickel price resulted in stockholders being reluctant to replenish stocks with an uncertainty of when the Nickel prices may bottom out. There had been an over supply of Nickel since Q2 blamed on a “technical deficit” in the preceding quarter. We question whether, it was more the case of the Nickel producers talking up demand and catching a cold with the uncertainty of the Eurozone currency position directly resulting in a lack of uptake on options by speculators and investors alike that traditionally like the commodities arena. The combination of these factors probably influenced an uncharacteristic what appeared freefall in Nickel price at times over the period.
Prices set to increase
These drivers amounted to de-stocking over August and September especially in the heavily “price elastic” rolled products, and we have certainly noticed a few stock gaps or lack of depth in stocks with certain competitors. In long products there are clearly some significant stock outs especially in Seamless Tubes leading to a contraction in range where ADD has prevented new purchases from China and EU input price significantly higher. These simple economics clearly point to increasing prices on the way to the user.
Anti-Dumping Duty – (ADD)
The European Union Commission introduced Anti Dumping Duty measures effective 29th June 2011 in respect of imports both directly and indirectly of Seamless Stainless Steel Tubes and pipes produced in China imported into the EU. The initial regulation measures are for a period of six months whilst considered for ratification by counsel. Our expectation is for the measures to be upheld and ADD extended up to 5 years. The objective was to curb the rapid growth in supply from Asia and provide European producers a more competitive level playing field.How the anti-dumping duty worked:-
Our understanding is the key Chinese producers were invited to declare their previous exports to the EU, and from this information were assessed on a company basis to agree a duty/tax applicable to their goods. These taxes range from 48% being the lowest up to 71.5%, with the taxes applicable immediately.
What this means to the EU stockholder:-
From a stockholder perspective China is no longer deemed a competitive source for the majority of purchases, the only exception possibly being very small and very large diameter items. Leading up to the measures, stockholders generally reduced stock levels and held off placing new mill orders uncertain as to the outcome. As soon as announced, European mill order books quickly filled up and a number of producers engaged the opportunity to increase input prices by typically 20% overnight, whilst stockholders generally increased stock material prices by around 50% to their “on the floor” Chinese stock. Purchasing from China enabled the stockholder to procure mixed “parcel” of dimensions on relatively low quantities, whereas EU producers working from a completely different cost base model insist on minimum production quantity per dimension and grade.What this means to the steel customer:-
Higher price, possibly contraction of range, extended lead times and ultimately more waste as alternative dimensions are used! If your company uses what are deemed as special sizes you may be required to commit to minimum quantity orders to ensure continuity of supply.
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