Stainless Steel Output Cuts Announced

Taiwan's two major stainless steel makers continue to limit output as a result of poor sales tonnages. Tang Eng is running its Kaohsiung works at around 60 percent of its capacity, while Yusco's crude stainless outturn for July will be 10,000 tonnes down on the May figure. Inventories throughout the supply chain in China have grown as production continued apace over the past couple of years. Buyers are now exercising caution. Mills including Jiuquan Iron & Steel have announced their intention to reduce output, while industry leaders Shanxi Taigang and Baosteel Stainless will take maintenance breaks during July and August.

There is something of a mixed picture in Europe. Economies in the south of the continent continue to struggle. Stainless suppliers there are also competing with cheap imports from the Far East. Some countries further north, particularly Germany and Sweden, are showing very promising signs of recovery. Demand across the region, though, has slowed seriously in recent weeks. This will be offset, of course, by the steel makers' traditional summers vacations. However, some of the financial stimuli that helped to sustain activity in Europe are starting to disappear. Several car scrappage schemes have finished and some governments are now looking to cut spending and reduce their budget deficits. Many observers believe that local mills will have to be very watchful about matching output to demand and keeping prices at a profitable level.

With rising nickel costs and a stronger demand after the summer holidays prices could strengthen later in the year if the cuts are successful.

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