Market Report

Strength in the flat-rolled stainless sheet market over the past several months has prompted domestic producers to announce a price increase that will take effect in early March. The increases, which only apply to types 201, 301 and 430, will hike prices 5 to 8 percent, exclusive of any changes in monthly surcharges. The previous increases, which were effective with shipments January 2, 2012, have been implemented in the market. Allegheny Technologies Inc. (ATI) expects demand to strengthen throughout 2012 before tailing off in the fourth quarter.

Major domestic producers of flat-rolled stainless products have announced higher surcharges for the period January 29, 2012 through February 25, 2012. Examples of two popular grades from North American Stainless, Inc. (NAS) are: 304/304L - $.9267 per pound, an increase of 7.3 percent and 316/316L - $1.3200 per pound, up 6.6 percent. The surcharges are based on the cash nickel contract on the London Metal Exchange (LME) which averaged $8.62 per pound from December 21 through January 20, the period upon which the surcharge is based, up 7.1 percent from the previous period’s average of $8.05 per pound.

U.S. carbon and alloy steel import license applications jumped 35.4 percent in January due to competitive pricing overseas, putting imports on course to register their largest month-on-month increase in more than a year. The Commerce Department’s report compared preliminary imports in December to January’s license applications. Heavy structural shapes increased 178.1 percent, cut-to-length plate was up 74.1 percent, cold-rolled sheet grew 85.4 percent and oil country goods were up 45.9 percent. All stainless products combined for an increase of 20.2 percent.

Scrap brokers and dealers are estimating that U.S. scrap prices will soften in February by $20-$30 a gross ton. Reasons cited for the drop in prices include higher inflows to scrap yards due to mild weather, increased scrap generation by the auto plants, and availability of alternate materials such a pig iron.

For the week ending January 28th, domestic raw steel production utilized 76.8 percent of the industries’ capacity, down from 77.3 percent the previous week. The year-to-date capacity utilization rate stands at 76.7 percent, compared to 73.2 percent in 2011. Tons produced are up 5.9 percent from the same period last year.

A recent U.S. Commerce Department report said that orders for durable goods, items which are meant to last three years or more, surged during December in a broad-based increase that included stronger capital spending by businesses and suggested manufacturing is holding up in a slow-moving economy. U.S. durable goods orders climbed 3.0 percent, led by gains for autos, commercial aircraft, machinery, communications equipment and primary metals. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, advanced 2.9 percent, suggesting some confidence among companies in the uneven economic recovery. Unfilled orders rose 1.5 percent, which was the strongest gain since March, 2008 and is an encouraging sign for manufacturing because the category is a sign of future demand.

The U.S. economy grew at its fastest pace in 1-1/2 years in the fourth quarter of 2011. The Commerce Department said that U.S. gross domestic product (GDP) expanded at a 2.8 percent annual rate, a sharp acceleration from the 1.8 percent rate of the prior three months and the quickest pace since the second quarter of 2010.

The Institute for Supply Management’s (ISM’s) manufacturing index rose to 54.1 in January from 53.1 in December. The new orders component climbed to 57.6, the highest since April, from 54.8 the previous month, while inventories continued to contract, though just barely. Exports grew to 55.0 from 53.0 in December, continuing a three month trend. But raw materials prices were also increasing, the sub-index rising to 55.5 from 47.5 in November, when prices were declining. A reading greater than 50 signals expansion, and January is the 30th month of continuous expansion.

Breaking News - The U.S. economy added 243,000 jobs in January and the unemployment rate dropped to 8.3 percent. The Labor Department’s nonfarm payrolls report exceeded economist’s expectations of 145,000 new positions last month, compared with a better-than-expected 200,000 in December. The data followed a report on private job creation from payroll processor ADP that said U.S. companies added 170,000 new workers, and was below expectations. The government’s tally showed 257,000 jobs were added in the private sector, compared with expectations of 163,000.

Price Indices* as of 02-03-2012 
                                                                             2011                            2012

       
*The indices are formulated from specific items within each respective product group and reflect changes that have occurred since 12-27-2010. The current quarter’s index is calculated using prices in effect on the Friday preceding the date of the report. A reading above 100.00 indicates an increase in price, whereas a reading below 100.00 indicates a price decrease.

DISCLAIMER - Boyd Metals does not guarantee the accuracy of the above data or recommend the use of same for any particular purpose.