The last few months have seen gradual decline in demand for finished steel products and raw materials used for manufacturing steel. The key raw materials used for manufacturing mild steel are iron ore and HMS scrap, while ferro chrome and nickel are the key raw materials for stainless steel.
The cost of production of nickel from nickel laterite ore is believed to be at around USD 15000/MT and current prices for Nickel at the LME are hovering around USD15200/MT. It seems that nickel prices have a strong support at USD15000/MT, and prices may not fall below this level. On a conservative side, we see the maximum decline in nickel prices can be up to USD14500/MT. If prices fall below this level, they would recover soon, as there would be renewed demand for LME nickel from Chinese companies who are currently using nickel extracted from nickel laterite ore. Falling ferro nickel prices and shrinking slowdown in demand has also resulted price now as well as the shrinking nickel ore demands.
HMS 80/ 20 scrap prices are currently trading just below $380/MT CFR Turkish ports, down $10/MT compared to the contract prices seen in the first week of April 2013.
On one side buyer is not willing to buy, or is willing to buy at 5% less than current market prices. This has made it difficult for suppliers to conclude contracts. Overall it seems that the global steel market has very less buyers and sellers right now.
On the stainless steel front, buyers are delaying purchases in expectations of a further 5% to 10% decline in nickel prices, as global economic conditions continue to deteriorate, especially Europe. Offer prices for grade 304 hot rolled coils of Chinese origin are currently at around $2,300 - 2350 /mt FOB China. Similarly prices for other stainless steel products such as stainless steel seamless pipes, stainless steel pipe
fittings and bars have also declined.
In the United States, the Commerce Department reported that orders for durable goods fell 5.7% in March, missing expectations for a decline of 2.8%. Durable goods orders for February were revised down to a 4.3% gain from a previously reported 5.6% increase. None of the economic indicators coming out from Asia, Europe or America in this month have shown any sign of strength.
We believe further economic stimulus would be required for providing strength to the global economy, and commodity prices should fall in this month and the month of May. Signs of recovery could be seen in or after June this year. May is likely to be another month of weakness for the global stainless steel industry and financial markets.
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