Declining seasonal demand, coupled with falling nickel prices, has led to a sluggish sales of stainless steel. While the demand for stainless steel is sluggish, users are trying to compress inventory. The expected decline in stainless steel surcharges has, to a certain extent, exacerbated the deterioration of the situation.
Although at the beginning of the year, while the price of stainless steel rose, European users were already confident in buying stainless steel, but now, many users already have enough inventory to use it after the summer. The buyer adopted a strategy to minimize inventory in June as it is expected to significantly reduce the stainless steel surcharge in July. In addition, some buyers also expect the premium for stainless steel to be further reduced in August.
European stainless steel production plants had hoped that the benchmark price of stainless steel would continue to rise before the summer vacation. However, due to the decline in demand growth, stainless steel prices in Europe have been in a state of anxiety for three consecutive months, and the price of stainless steel in southern Europe has even begun to fall. Since the reference period for calculating the stainless steel surcharge in the United States is longer and the implementation time is longer, the performance of the stainless steel price for three consecutive months is more obvious. As buyers have realized that the price of stainless steel will fall in July, although the US stainless steel surcharge reached its highest in June, sales began to plummet immediately from the beginning of June. For the sake of promotion, stainless steel production plants and dealers have been forced to implement the July surcharge in less than half of the time in June. A similar situation is likely to occur in July.
Many figures relating to the stainless steel supply chain indicate the possibility of halting the implementation of the stainless steel surcharge system. In order to prevent users of stainless steel production plants and distributors from being affected by price fluctuations, the termination of the stainless steel surcharge will involve stainless steel production plants and distributors to hedge their stainless steel balance. As an option, raw material suppliers and steel mills may reach new agreements with longer maturities, fixed price contracts. In addition to setting a more stable price, this will, to some extent, help eliminate the cessation of purchases that can be expected from upcoming price changes.
As steel mills have managed to maintain output for real demand, the delivery time for certain European grades of stainless steel, especially long products, has been extended. According to reports, the Spanish stainless steel producer Acerinox Group will be fully loaded before the end of July. Although not all industries have strong demand for stainless steel, many observers expect demand for stainless steel to be weaker in the second half of 2010. Therefore MEPS expects that the stainless steel plant will reduce production again.
Far Eastern stainless steel procurement activity has also slowed down due to the expected decline in stainless steel prices and in order to reduce inventories. Although the stainless steel plant in the Far East is far from fully achieving capacity utilization, it is also reducing production.
Although at the beginning of the year, while the price of stainless steel rose, European users were already confident in buying stainless steel, but now, many users already have enough inventory to use it after the summer. The buyer adopted a strategy to minimize inventory in June as it is expected to significantly reduce the stainless steel surcharge in July. In addition, some buyers also expect the premium for stainless steel to be further reduced in August.
European stainless steel production plants had hoped that the benchmark price of stainless steel would continue to rise before the summer vacation. However, due to the decline in demand growth, stainless steel prices in Europe have been in a state of anxiety for three consecutive months, and the price of stainless steel in southern Europe has even begun to fall. Since the reference period for calculating the stainless steel surcharge in the United States is longer and the implementation time is longer, the performance of the stainless steel price for three consecutive months is more obvious. As buyers have realized that the price of stainless steel will fall in July, although the US stainless steel surcharge reached its highest in June, sales began to plummet immediately from the beginning of June. For the sake of promotion, stainless steel production plants and dealers have been forced to implement the July surcharge in less than half of the time in June. A similar situation is likely to occur in July.
Many figures relating to the stainless steel supply chain indicate the possibility of halting the implementation of the stainless steel surcharge system. In order to prevent users of stainless steel production plants and distributors from being affected by price fluctuations, the termination of the stainless steel surcharge will involve stainless steel production plants and distributors to hedge their stainless steel balance. As an option, raw material suppliers and steel mills may reach new agreements with longer maturities, fixed price contracts. In addition to setting a more stable price, this will, to some extent, help eliminate the cessation of purchases that can be expected from upcoming price changes.
As steel mills have managed to maintain output for real demand, the delivery time for certain European grades of stainless steel, especially long products, has been extended. According to reports, the Spanish stainless steel producer Acerinox Group will be fully loaded before the end of July. Although not all industries have strong demand for stainless steel, many observers expect demand for stainless steel to be weaker in the second half of 2010. Therefore MEPS expects that the stainless steel plant will reduce production again.
Far Eastern stainless steel procurement activity has also slowed down due to the expected decline in stainless steel prices and in order to reduce inventories. Although the stainless steel plant in the Far East is far from fully achieving capacity utilization, it is also reducing production.
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