Stainless steel sector to remain bullish in 2022
2021 has been an exceptional year for the global stainless steel industry. Most companies, throughout the supply chain, will post very strong financial results for the period. Steelmakers have benefitted from a substantial upturn in selling prices. This is despite an increase in their input costs. Many of them are posting record profits, following several consecutive quarters of growth.
Despite a slowdown in activity at the year-end, most market participants remain optimistic regarding the prospects for 2022. However, opinions are divided on the short-term outlook for stainless steel demand and prices. Buyers have become increasingly cautious with their purchasing, in recent months. The spread of the Omicron variant, rising inflation and ongoing supply chain constraints will continue to challenge business operations in the new year.
As the end of 2021 approaches, stainless steel prices remain at elevated levels, in all regions. The MEPS European average 304 cold rolled coil basis value is now equal to the all-time high, recorded in January 2007. In the United States, the comparable figure is yet to reach its previous peak but stands at its highest level in fourteen years.
Nevertheless, the forward view on global prices is, gradually, turning more pessimistic – in particular, for coil products, where the recent hikes were the steepest. No crash in stainless steel transaction values is, however, foreseen. Prices are expected to decline more slowly than they increased in the past twelve months.
In Asia, anticipated reductions in raw material costs, coupled with seasonally low demand, are likely to exert negative pressure on selling values, prior to the Lunar New Year. However, output cuts, in the region, should restrict supply and limit the size of any price decreases.
Further rises in North American basis values are expected to be constrained by reduced purchasing activity, in the first half of next year. Moreover, buyers have significant quantities of material already on order, with both domestic and overseas suppliers. This will start to arrive in the early part of 2022. However, supply from domestic stainless steel producers is expected to remain restricted. This will help to keep prices at elevated levels, in the near term.
European flat product transaction values are forecast to move upwards early in the new year – particularly, for cold rolled coils and sheets, for which availability remains tight. However, inventories are increasing for most grades and sizes. This, plus a softening in demand, is expected to restrict the level of price rises that stainless steel buyers will be prepared to accept during this period.