Alloy Surcharges Hit Record Highs

The price of stainless steel is always volatile, with myriad different factors having impacts on cost. Alloy surcharges in the EU for austenitic stainless steel have continued to increase significantly over recent months and are set to hit the highest ever recorded this May.

Purchasing activity among end-users was particularly high in March, with consignment stocks being pulled forward in anticipation of price rises. By the end of March, the so-called 'panic buying' had slowed somewhat but still remained at a high level.

In sharp contrast to the buying behaviour of end-users, stockists showed marked reluctance to make new forward-orders with local steel mills; a major reason cited for this reluctance was 'exceptionally-high material replacement costs'. In Europe, the resale price of cold-rolled sheet (type 304) hovered between €5.20 and €5.40 per kilogram in April but has since increased.

Stainless steel manufacturers  have announced that its alloy surcharge on flat products of grade 304 will hit a record-breaking high of €3,844 per tonne (around £3,287) this month. This figure represents a massive increase of 44% in comparison with previous published alloy surcharges for March. Several factors account for this increase, including high input costs for various raw materials and the current volatility of nickel prices.

The new surcharge, which is now over twice that of April's average EU mill basis price, uses a 'base plus alloy surcharge' pricing structure. Stainless steel producers in Europe have encouraged the majority of their customers to order using this mechanism in recent months but a growing number of purchasing managers now see the system as their 'least preferred option'.

Steelmakers in the EU are now being forced to decide whether the traditional pricing mechanism should be preserved or whether to secure tonnages at a fixed price, which is generally lower. Numerous buyers have received 'effective' offers in terms of cost for type 304 cold-rolled sheet to be delivered in June and July. 

Though stringent lockdowns in the Far East are causing some shipping delays, these significantly-lower prices are still very appealing to customers in Europe. Steel mills in the EU are thus likely to remain under strong pressure to offer more flexible pricing options.

BS Stainless will continue to supply premium-quality stainless steel products at the most competitive market price. For more updates on this ever-changing situation, along with lots of other news and special features, please subscribe to our regular newsletter.

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