Stainless resale values struggle to surpass mill prices

31st October 2022

Stainless steel buying activity, in Europe, was weaker than anticipated, in October. Many market participants reported a slight improvement, month-on-month.

However, overall tonnages were much lower than those secured in the pre-summer period. As hopes for any significant improvements in demand for the fourth quarter have diminished, sentiment has declined.

Distributors continue to try to run down their bloated inventories in time for the year-end. This is taking longer than many anticipated due to the lower-than-expected level of demand. In addition, some are still receiving import tonnages ordered earlier in 2022.

By the end of this month, the European fourth quarter safeguard quotas for Taiwan, Turkey and “other countries” will be depleted. Consequently, purchasing managers state that they have enough material to last well into next year.

Competition for orders is tough among resellers. Some need to generate cash. This has resulted in many deals been concluded at values below current mill replacement offers. It is likely that a large proportion of this material will have been booked into stock at a time when buying prices were substantially higher than today.

In normal trading years, material being sold at values significantly less than those at which it was purchased would be a considerable cause for concern for businesses. Currently, there is little panic in the market as any losses are being offset by the tremendous profits made earlier in the year. Many companies remain confident that they will still post a positive result for 2022.

While most agree that resale values need to increase so that profit margins can be restored, they also note that it is very difficult to lift prices with limited demand combined with large quantities of material on the ground.

Buyers can replenish any stock gaps quickly and much more cheaply by purchasing from existing inventories, rather than placing orders for new production. Consequently, mill bookings remain low and their increased pricing aspirations are difficult to achieve.

Despite capacity cuts and inflated raw material costs, European stainless producers are being met with resistance from the few buyers who do have tonnages to place.

Some market participants anticipate a more concerted effort to lift stainless coil and sheet prices, throughout the supply chain, in the new year. It is unlikely that either mills or distributors will want to start 2023 with their financial results in the red by continuing to accept loss making orders.

However, there remains a great deal of uncertainty surrounding next year and what impact the geopolitical and economic conditions will have on demand.

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