Stainless Bullishness not Unanimous

Martin Abbott, a former metals trader who is now publisher of American Metal Market, New York, recalls predicting ten years ago that nickel prices would continue to rise, reaching new heights as demand soared past supply.

But, as he told to attendees of the Institute of Scrap Recycling Industries Inc. Nickel-Stainless Roundtable on Thursday, that optimism was predicated on events that did not occur—such as the disappearance of Russia’s Norilsk from the market. Rather than collapsing, Abbot noted, Norilsk survived and now engages “in complex financial transactions” with a strong presence in the global nickel market.

At this year’s event, sponsored by the Pittsburgh Chapter of ISRI and taking place in Pittsburgh, Abbott was preceded by speakers who exhibited varying degrees of optimism for stainless steel demand and nickel pricing. “I am not as bullish as our other speakers. I have some . . . reservations,” Abbott declared.

At the heart of Abbott’s worries was a concern that traders are “confusing stainless production with stainless consumption.” Just because mills are pumping out stainless steel, that does not guarantee the end markets for it, he noted.

Much of the demand being exhibited, he noted, is in China, where there is cause for concern that central government planners are beginning to pull in the reins of what they see as “overheated” sectors of the economy.

Closer to home, Abbott notes that actual consumption of stainless steel in North America remains relatively weak, with a 12 percent drop exhibited year-to-date.

Abbott was willing to note, though, that his bullish predictions of ten years ago were mistaken, so this time around, “Maybe I’ll be wrong again, and you may wish to invite me back if only as a counter-forecaster.”

Other speakers at the event saw signs of economic turnaround that are beginning to deplete stainless steel and nickel inventories, as well as causing vigorous competition for raw materials, including stainless steel scrap.

Clarence McAninch, CEO of Universal Stainless & Alloy Products Inc., Bridgeville, Pa., says the company’s sales to steel service centers are up over last year, and points to stainless steel rebar as one of several markets for the metal “that is forecast to grow.” McAninch also sees growth opportunities in the power generation segment and in military aviation.

McAninch added that “there has been a definite uptick” in the economy, but that the decline in the leisure aircraft industry and the struggle to compete against low-price imports continues.

Larry Snyder of Metal Management Inc., Chicago, predicted that stainless scrap supplies would remain tight in 2003 and 2004, with a domestic economic upturn continuing. He also predicted that more 18/8 scrap blends would be shipped as stainless steelmakers attempt to reduce their raw materials costs and compete for material sought by China.

China’s affect on the scrap market has already induced Metal Management to close down a California wire chopping facility, and a recent trip by Snyder to China convinced him that mills and smelters being built there can compete on a technology and efficiency basis with Western capacity. “I would suggest everyone learn Chinese,” Snyder told attendees.

Larry Pryor who works for London-based metals trading and supply company Sudamin Corp. in Sewickley, Pa., gave his views of the nickel and ferrochrome situations.

Noting that “U.S. companies are poised to increase their capital spending,” Pryor remarked, “We feel our industry is poised for significant improvement next year.”

On the ferrochrome side, demand began to exceed supply in 2002, he remarked. Regarding stainless steel, Pryor said the finished product’s demand and supply should be in balance in the near term, but that tightness in stainless steel scrap supplies should continue.