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Saturday, February 05, 2005

Expect high prices to continue through 2005

World stainless-steel scrap prices will stay strong in 2005 be-cause of low stocks and high demand. So says Norbert Spaeker, director of ELG Haniel in Duisburg, Germany, the world's largest scrap dealer. "We see high scrap prices in 2005 because we expect consumption to be strong, while availability will be reduced because there are virtually no stocks," he tells the Reuters News Service.

Scrap availability could rise by 5% to 8%, or 500,000 metric tons, to about
7.5 million metric tons next year, compared with 2004. However, "scrap is now almost totally coming from arisings (new scrap generated by steel production or manufacturing)," Spaeker says. "Stocks built up in 2002 and 2003 are now consumed, and there are virtually no stocks left." ELG has plants in Europe and North America and a joint venture in Japan.

European stainless scrap availability tightened in midyear because smaller yards had offloaded most of their stocks at the start of 2004, when prices peaked at around 1,200 euros per metric tons. (That's equal to $1,335 per net ton in the U.S.) Scrap prices in European Union countries are typically determined using formulas based on the previous monthly average London Metal Exchange (LME) nickel cash price.

Spaeker says market fundamentals should keep scrap prices firm, largely shielding them from the sharper volatilities of LME nickel prices. LME prices have swung wildly this year in reaction to fund buying and profit taking, fluctuating between about $10,500 per metric ton ($4.76/lb) and more than $17,000 ($7.71). Through September, LME nickel had averaged 6.23/lb ($13,735/metric ton).

"Although world availability will rise this year to about 7 million tons from 6.2 million, it will not be as much as in the previous year when it rose by 12% to 13%," Spaeker says. "Additionally, we expect production of stainless steel to rise to about 26 million tons in 2005 from about 24.3 million this year."

He dismisses any potential impact from stainless-steel producers, mostly in Asia, turning to other sources of scrap. Some Asian producers and a few in Europe and North America have increasingly sought substitute feeds as a cheaper alternative to scrap containing nickel, such as ferritic and ferromanganese grades.

However, Spaeker says austenitic, or nickel bearing, steel production dropped to 68% of total production in 2004 compared to 72% in 2003. This year he forecasts a drop to about 65%. "In some uses you can use nonnickel grades of scrap but in others, like in architectural design favored in China, you need nickel," he suggests.

Copyright C 2005 Reed Business Information. All Rights Reserved.

posted by MetalPro Sales at 4:36 PM  

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