Scrap costs are likely to weaken
UK based MEPS said that world Average transaction values were
around little changed during September. This was in line with our forecasts from August. Prices in Asia and the EU increased due to higher nickel and scrap costs. Selling figures in North America softened as a result of alloy surcharge reductions. However, buying activity was subdued in all regions. Inventories were low and the mills' delivery lead times remain short. Consumption by the automotive and domestic appliance industries is holding up well. Demand from other sectors has yet to recover.
According to MEPS, a weakening US dollar against other major currencies created upward pressure on nickel figures over September. However, values are expected to react more to market fundamentals and head downwards in the short term. Mines continue to come back on stream. New schemes are also projected to start up shortly. This should add to oversupply and keep prices in check during the remainder of 2010. A seasonal upturn in consumption is predicted during the first quarter of 2011. Investors are also likely to return to the nickel market. This is forecast to result in a revival in the price of alloys. However, slow growth rates across the stainless steel industry could push values down again during the second half of 2011.
Scrap costs are likely to weaken in the short term before moving higher in the New Year. Chromium and molybdenum prices are expected to be strong over the next twelve months.
