Russian stainless steel market reacts to price hike

The 1H 2006 has been the most auspicious period for the Russian stainless steel market over the recent years. The price rise that overwhelmed the foreign markets practically has not affected Russia’s inner trade. The reason to it skulks in the resumption of flat-rolled stainless steel production in 2005 at ChMK, in high stock levels of traders and in the moderate prices for currently placed orders with foreign producers. However everything tends to end, sooner or later.

Beginning since July 2006, the inner market prices went sharply up. In this period the stock levels of trading companies were high enough however the sharp price hike on foreign markets has forced to gingerly place new orders. As a result of this discreet policy the stock levels kept tumbling sharply considering the limited stainless steel production at local plants.
By the end of 2006 and the beginning of 2007, the Russian market will have to face a deficit and a further increase of prices. This can be logically explained. In Russia there is not a single modern integrated flat-rolled stainless steel making plant similar to the existing in Europe, Asia, and in China.
Russia’s local plants are able to produce limited capacities and product ranges that do not allow them to compete with foreign makers.
Russia’s rapidly-developing machinery sectors cannot afford purchasing low-quality stainless steel materials. Thus the shortage of stainless steel imports will strongly affect in the first place the machine building enterprises which include food equipment and washing machines manufacturers, consumer goods industry, kitchen and table ware producers.
Russia’s military-industrial complex, atomic and chemical sectors have big anxiety also. The government has recently adopted a program of invigoration and revamping of these sectors with budget funding going on. The decisions on the funding amounts were taken within 2005 and the beginning of 2006. Yet now it is quite obvious that the allocated funds cannot catch up on the ongoing price growth.
Besides the funding issue, the accomplishment of the state program may stumble over the difficulties bound with the inconsistencies between the ruling standards and the consumed stainless steel products.
The local consuming enterprises, de facto, have permission to use imported stainless steel which was produced in compliance with foreign standards (DIN, AISI, EN, JIS).
As a result of 2005, over 80% of flat-rolled stainless steel consumed in Russia had a foreign origin. However still many local enterprises are forbidden to use imported products. This looks like a paradox. Neither the government nor private steel companies have a heart for investments into building modern integrated flat-rolled making plants. This poses a big threat to the future of the Russian special steel industry.
According to USSA’s estimation for 2006, the whole production of stainless steel in Russia will amount to less than 0.13 million tons whereas the consumption capacities will reach 0.27 million tons.
In conclusion it is worth ourlining the plausible problems that Russia is likely to face in 2007 – the year of its entry into WTO:
- further price rise
- deficit of flat-rolled and long stainless steel
- lack of state policy of stainless steel export-import operations
- dearth of budget program fundings
- low market transparency
- non-availability of investments to build modern integrated stainless steel making plants
- lack of specialized metal service centers

A variety of related issues will be discussed at an international seminar ‘Price 2007 For Flat-rolled Stainless Steel’ to be held on 25 January, 2007 in Moscow.

For details, please, contact USSA at +7 495 747 5995 or to email\r\n\r\n