London, 4 April 2011

The LME nickel price plummeted from nearly US$29,000 per tonne on March 5 to just above US$25,000 per tonne on March 15. This will create negative pressure on stainless steel transaction values in the near term. In Europe, the alloy surcharge for type 304 flat products in April is down by between €76 per tonne (ThyssenKrupp Nirosta) and €102 per tonne (Aperam) compared with the March figures.

Many customers had, since the beginning of the calendar year, been either restocking or buying more than their immediate requirements as they anticipated effective prices rising through the first half of 2011. This led to healthy ex-mill sales volumes and made it difficult to quantify the upturn in real demand. However, as buyers have been able to foresee lower transaction figures in the near future, or because they are cautious of price volatility, purchasing activity has slowed to a crawl in many countries in recent weeks.

Supply chain participants will be optimistic that the lull in purchasing during March will be temporary and that customers will be encouraged to buy at April transaction values. Furthermore, producers and stockists alike will hope that they can sell reasonable volumes at rising prices during the remainder of the second quarter because both demand and selling values are predicted to slip during the summer period.

The political unrest in North Africa has, inevitably, led to a reduction in consumption of stainless steel by manufacturers and for projects in the countries affected. Producers in Italy and Spain, who traditionally supply the region, have had to look for other outlets. MEPS has reports of material from these mills being offered at competitive prices in the north of Europe.

The earthquake and tsunami in Japan have led to some disruption to supplies of stainless steel and ferro-nickel in Asia. However, there is unlikely to be any severe shortage of either material in the region. Producers in South Korea will step up their output of both products, while stainless mills in China will look for increased supplies of nickel pig iron.

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