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Specialty report: stainless shines through the volatility: despite high prices, stainless consumption is on the rise, offering some welcome good news to a specialty market that has been in the doldrums for the past few years.

Article Excerpt
Much like in the carbon steel sector, distributors of stainless steel are scrambling to fill customers' needs in the face of tight supplies and long lead times. But demand is surging, prices are strong and service center executives are smiling.

Overall, consumption of stainless steel increased 8 percent in the first quarter vs. the same period last year, according to data from the Specialty Steel Industry of North America, Washington, D.C. Stainless steel imports increased 3 percent, grabbing a 23 percent share of the U.S. market.

By product, consumption of stainless sheet and strip--the industry's largest product line--grew 9 percent in the first quarter, while imports grew 4 percent. Stainless plate consumption increased 15 percent, while imports jumped 25 percent. Stainless bar consumption was flat, however, while imports declined 9 percent; and stainless rod declined 10 percent, while imports dropped 22 percent, SSINA reported.

Some of the gain in the bread and-butter sheet, strip and plate segments is attributable to inventory building by both distributors and end-users, who were surprised by the speed and scope of the market's recovery and scrambled to buy ahead of the next price increase. But most experts agree the demand is real and the surge in actual consumption will sustain itself into 2005 and beyond.

Since the beginning of the year, stainless mills have implemented a series of price hikes ranging from 3 to 10 percent, as well as raw material surcharges that add 20 to 50 percent more to the cost of some grades.

The tight supply of stainless scrap, largely due to exports to China, and the high cost of inputs such as nickel and chrome, continue to put upward pressure on stainless prices. With the cost of scrap at around $1,200 per gross ton in mid-June--compared to about $760 a ton last year--surcharges will remain a factor, says industry analyst Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa.

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