EU Stainless Scrap Prices Drop 10%, More Seen

European stainless steel scrap prices have fallen by 10 percent in the past couple of weeks because of lower demand and a drop in the primary nickel market, and further falls in scrap values can be expected in the next few weeks, traders said on Monday.

"Stainless steel mills across Europe are limiting their scrap intake due to weaker end-use consumption and, if anything, we're looking at lower nickel prices once the strike at Inco is over," one trader said.

Scrap prices in western European countries are typically settled using the previous monthly average nickel price on the London Metal Exchange for the next month's deliveries.

Three-months nickel was quoted at $8,340/360 a metric ton at 1210 GMT on Monday - about a $1,000 drop since June 10.

Another trader said: "Scrap prices will definitely go down for July deliveries, especially as most steel works are shut for a couple of weeks and drop their scrap quotas. Then we have to look at August and we're in the lap of the gods concerning nickel prices, but less demand and summer shutdowns means there's probably a long position building in scrap."

European mills will shut for about two weeks later next month and August, a time typically taken by metals producers to repair and maintain machinery.

However, European stainless giant Arcelor recently announced a raft of cuts across some of its plants in the region during the third quarter because of weaker end-use demand.

Others such as Thyssen Krupp Stainless and Avesta Polarit were also expected to follow suit, although Spain's Acerinox told Reuters it had no such plans.

Acerinox ranks among the three top stainless producers in the world with a rated capacity of 2.5 million metric tons a year.

"We are not cutting output at any of the plants owned by Acerinox in the third quarter," a spokesman said from company headquarters in Madrid.

Scrap prices have dropped to $800-820 a metric ton for 18/8 solids on a cif basis -- from $880-900 -- and about $100 less for same grade turnings.

Traders say prices will drop b y another $50 this month because of weaker demand.