Stainless steel imports rising as the S&P Global US Manufacturing PMI fell from 57 in May to 52.7 in June — indicating a significant slowdown in the rate of expansion.
Some manufacturers are choosing to cut their production due to ongoing supply chain issues, while others are becoming increasingly concerned about high-cost inventories and a looming economic slump, according to industry reports.
Stocks of stainless steel, especially those of hot and cold rolled coil, have been rapidly building over the past few months.
A combination of increased domestic supply and higher-than-normal import volumes has resulted in many stockists and service centers describing their inventories as “bloated.”
Through Section 232, U.S. steelmakers have been protected from overseas competition for several years. However, restricted local availability, coupled with hikes in North American stainless steel prices, resulted in a large number of buyers purchasing material from overseas suppliers — especially, during the past 12 months.
Stainless flat steel product imports surged by almost 120%
Latest estimates suggest that stainless flat steel product imports surged by almost 120%, year-on-year, in the first five months of this year.
Consequently, bookings with U.S. stainless producers have fallen and delivery lead times have shortened.
Order books at Outokumpu and North American Stainless are still open for September.
Buyers, who have been unable in recent months to obtain new production from cold rolled coil mills are now being offered tonnages.
Moreover, the availability of excess prime and secondary coils from the producers has increased significantly during the past few weeks. This is a further confirmation of the weakening order books.
As a result of the inflated stocks and reduced buying activity, resale prices and profit margins have tumbled.
No official announcements by the U.S. stainless mills
While there have been no official announcements by the U.S. stainless mills, buyers report that, in addition to the recent decreases in the monthly alloy surcharge, they detect some erosion in basis pricing for coils.
As businesses attempt to reduce their expensive and overstocked inventories, prices are likely to remain under downward pressure.
U.S. stainless selling values are currently significantly higher than those in Europe and Asia. The MEPS 304 cold rolled coil average for Asia, in July, was nearly $2,000 per ton less than the corresponding North American figure.