The increasing flood of imports from Asia, which had started during the 4th quarter 2006, coupled with greater availability of domestic material, was the main factor that led to a
strong over-supply of the EU market, an accumulation of stocks and the disruption of the EU stainless steel market balance in the 1st half-year 2007.
At the same time, the unrelentingly alloy cost increases - especially of nickel - brought European transaction prices at record levels towards the beginning of the 3rd quarter.
Although underlying consumer demand continued to be propelled by robust economic growth, the price situation discouraged large forward orders and started to cause widespread
uncertainty in the marketplace.
As summer started with LME nickel prices sliding as much as 30 % from their May 2007 peak, with stainless steel prices set to fall distributors were keen to run down their inventories as quickly as possible and consumers to buy on a very short term basis. Consequently, the EU stainless steel market in the 2nd half-year 2007 was considerably weaker in comparison to the situation earlier in the year. Whilst, at the halfway stage, the EU stainless crude steel production was only 4,4 % down on the figure in the same period of 2006, producers were obliged to make substantial cuts to output in the 2nd half-year which saw a decrease by 23 % compared to July-December 2006. Year-on-year, the EU stainless steel production was reduced by 1, 26 Million tonnes.
Order bookings improved towards the end of the 4th quarter 2007.However, future market trends must be viewed with extreme caution because inventories remain high relative to consumption, all the more so as the leading economic indicators and the credit turmoil point at a decelerating growth of end-use demand at the start of 2008.