Stainless Steel Surcharges to Rise

Following recent strengthening of Nickel prices on the LME surcharges for September stainless steel deliveries are expected to rise. With the current price levels of Nickel this should result in around 50 GBP ( 61 EURO) increase for 304 (1.4301) and around 75 GBP (91 EURO) for 316 (1.4404). You can see an extract from the Wall street journal that may shed some light on the background to the increases and potential outlook

Miners around the world have started ramping up output of nickel, a main component in stainless steel, after cutting back during the depths of the global financial crisis. Demand has roared back this year, helping draw down nickel stockpiles at the London Metal Exchange by 30% since February.

The result is a tight balance between supply and demand, with some analysts believing the nickel market faces a slight deficit this year that will swing back to a small surplus next year as production catches up.

The possibility of a tight nickel market in the short term has been apparent for some time. In April, the International Nickel Study Group, based in Lisbon, said production this year would "slowly increase" to almost 1.4 million metric tons, while consumption saw a "robust increase" to 1.39 million metric tons. A metric ton is equal to 2,204.62 pounds.

The recovery in demand for stainless steel has helped push nickel prices up roughly 14% this year, to slightly higher than $21,000 late last week on the LME. That is down from the mid-April high of $27,595 in mid-April amid indications that demand growth has moderated and the early-year rally was overdone. Still, supply tightness is expected to remain through year end.

Demand for stainless steel usually falls during the summer months but this is usually compensated for by falls in production.