Stainless Steels Market Tracker - metalbulletin.com

Stainless Steels Market TrackerGlobal market analysis of stainless steel flat and long products

lRather as in carbon steel, AK Steel was the first US mill to target base price rises for January shipment/delivery but larger players have followed suit. The targeted gains will exceed US$150/tonne if applied in full though buyers seem unconcerned by the unusual hikes. Though there have been no panic purchases in advance, we do anticipate base prices will rise in the New Year, at least in part though potentially higher import penetration and unwillingness among consumers to build excessive stock will put a ceiling on local price rises. We forecast mills will gain 50% of their targeted hike in January.

l Fresh from their success in raising base prices from October, European mills have decided since the US announcements were made, to target some €20-30/t (up to £35/t in the UK) price rises for next month’s deliveries, in order to partially offset a total price decline, caused by falling surcharges, and continue to bolster their financial position. Unlike in the USA, however, there is little to indicate from a demand perspective that prices can gather momentum. Consumer stocks are low but not so low in terms of demand and competition between suppliers is intensifying within the region’s comparatively stronger market, Germany.

l Most Asian mills appear to be reducing production and at the same time, pushing through price rises whereas Chinese mills are adopting a different approach, basing their pricing strategy on their raw material purchase prices of the month before. Though the downward direction here has scuppered the upward momentum elsewhere, raw material gains in recent weeks seem likely to push all producers to raise prices in the month ahead.

lUS Highlights: Mills target substantial base price gainslEU Highlights: Competition rises for German customlAsian Highlights: Chinese mills cut prices not supply

Stainless steel transaction price forecasts ($/tonne) Downward revisions to our nickel price forecasts should limit the new year recovery, but it remains on course.

Source: MBR

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Europe 304 Transaction Asia 304 Transaction US 304 Transaction

Forecasts

Issue 231November201227 November 2012 www.metalbulletinresearch.com

ContentsMarket prices 2North America 4Europe 6Asia 8Scrap highlights 11Alloy highlights 12Alloy surcharge highlights 14Global stainless output /production

highlights 15Stainless steel price summary /

key market indicators 16

Important information

This publication is afree sample issue.You need the latest publication to give you:l Regional analysis and outlook for stainless steel and flat long product pricing, including

base, surcharge and effective transactions for key austenitic and ferritic gradesl Short and medium-term forecasts for key market parameters – consumption, production

and pricel Selected regional supply and demand analysis, with tables of key production,

consumption, trade and inventory statisticsl Analysis of alloy surcharge composition and short-term outlook, focusing on key raw

materials and their recent developments

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2 Stainless Steels Market Tracker November 2012

Metal Bulletin Research

Grade 316, 2mm4 Grade 430, 2mm

Dec 12 Nov 12 Jan - Dec 12 Dec 12 Nov 12 Jan - Dec 12 Dec 12 Nov 12 Jan - Dec 12

Germany €/tonne 1070 - 1170 1120 1134 1470 - 1570 1520 2030 1010 - 1090 1050 1165Y-o-Y % chg 4.2% -0.4% -1.7% -20.6% -23.2% -9.6% -8.3% -8.3% -8.5%

Italy5 €/tonne 920 - 980 950 1053 1335 - 1380 1358 1920 910 - 940 925 1073Y-o-Y % chg -5.0% -9.5% -3.1% -25.6% -27.6% -5.4% -11.9% -11.9% -8.8%

France €/tonne 1070 - 1150 1110 1122 1470 - 1520 1510 1725 1010 - 1070 1040 1092Y-o-Y % chg 8.3% 3.3% -3.4% -12.1% -12.5% -14.3% -1.4% -1.4% -12.0%

United Kingdom £/tonne 860 - 940 900 1057 1160 - 1240 1200 1721 810 - 890 850 1141Y-o-Y % chg -8.7% -13.5% 4.3% -25.0% -27.3% 7.9% -22.7% -22.7% 3.9%

Spain €/tonne 990 - 1100 1045 1098 - - - - - -Y-o-Y % chg 3.5% -1.4% 2.8% - - - - - -

Belgium €/tonne 1070 - 1100 1085 1120 - - - - - -Y-o-Y % chg 5.9% -0.5% -1.1% - - - - - -

Netherlands €/tonne 1070 - 1100 1085 1127 - - - - - -Y-o-Y % chg 4.3% -0.5% -2.4% - - - - - -

East Coast

- Domestic $/lb 0.55 - 0.58 0.6 0.6 0.73 - 0.77 0.8 0.7 0.53 - 0.56 0.5 0.69Y-o-Y % chg -0.5% -1.2% -15.7% -2.0% -3.7% -21.2% -22.1% -22.1% 28.5%

- Import $/lb 0.59 - 0.62 0.6 0.7 0.77 - 0.81 0.8 0.8 - - -Y-o-Y % chg -0.5% -1.1% -11.7% -1.9% -3.5% -24.4% - - -

West Coast

- Import $/lb 1.23 - 1.26 1.3 2.6 - - - - - -Y-o-Y % chg -52.1% -49.7% 24.9% - - - - - -

China $/tonne 2794 - 2874 2944 3521 4190 - 4271 4325 4649 1541 - 1638 1571 1535Y-o-Y % chg -7.8% -5.9% -3.7% -1.4% 0.6% -16.8% 23.2% 20.9% -3.0%

Japan $/tonne 3030 - 3277 3154 3715 4230 - 4477 4354 4925 - - -

Y-o-Y % chg -0.7% -3.7% -15.0% -4.3% -6.4% -21.3% - - -

South Korea $/tonne 3318 - 3468 3393 3456 4518 - 4668 4593 4644 - - -

Y-o-Y % chg 8.6% 6.9% -7.9% 6.2% 4.4% -19.8% - - -

Taiwan $/tonne 2968 - 3180 3024 3433 - - - - - -

Y-o-Y % chg -1.6% -4.8% -8.0% - - - - - -

CMP, Grade 304, 3-8mm CMP, Grade 316, 3-8mm PMP, Grade 304, 8-30mm6

Dec 12 Nov 12 Jan - Dec 12 Dec 12 Nov 12 Jan - Dec 12 Dec 12 Nov 12 Jan - Dec 12

Europe:

Germany €/tonne 950 - 1050 1000 1523 1350 - 1450 1400 1769 1300 - 1400 1350 1740Y-o-Y % chg -31.8% -32.2% -2.4% -20.2% -15.2% -8.2% -22.6% -20.6% -7.7%

Italy €/tonne 900 - 960 930 1360 1315 - 1360 1338 1686 1274 - 1410 1342 1573Y-o-Y % chg -31.6% -28.5% 0.6% -20.4% -10.8% -10.8% -12.0% -12.0% -7.6%

France €/tonne 950 - 1030 990 1478 1350 - 1430 1390 1829 1300 - 1400 1350 1625Y-o-Y % chg -32.9% -29.3% -4.2% -19.4% -20.6% -10.7% -16.9% -12.9% -10.3%

United Kingdom £/tonne 768 - 847 807 1211 1066 - 1145 1106 1478 964 - 1114 1039 1364Y-o-Y % chg -27.4% -31.3% 0.8% -22.4% -28.2% -5.2% -22.7% -18.5% -2.0%

Spain €/tonne 890 - 1000 945 1439 1240 - 1350 1295 1815 1300 - 1400 1350 1518Y-o-Y % chg -33.5% -27.3% 2.5% -28.1% -22.7% -7.7% -9.7% -5.3% -10.3%

East Coast

- Domestic $/lb 0.44 - 0.48 0.5 0.6 0.62 - 0.67 0.6 1.2 1.04 - 1.05 1.0 1.32Y-o-Y % chg -18.5% -19.0% -30.2% -44.7% -45.7% 18.5% -22.0% -22.0% 12.2%

- Import6 $/lb 0.48 - 0.52 0.5 0.9 0.98 - 1.02 1.0 1.1 1.08 - 1.09 1.1 1.21Y-o-Y % chg -40.2% -40.5% 5.5% -7.3% -8.9% 2.7% -7.2% -7.8% 4.0%

West Coast

- Import6 $/lb 1.12 - 1.16 1.2 2.4 1.67 - 1.68 1.7 3.5 1.37 - 1.39 1.4 2.78Y-o-Y % chg -49.9% -47.4% 1.3% -50.1% -49.6% 5.6% -48.5% -49.4% 7.7%

China $/tonne 2695 - 2775 2842 3477 4090 - 4171 4223 4585 3156 - 3220 3151 3331Y-o-Y % chg -19.0% -13.9% -5.5% -8.7% -2.9% -22.0% -2.6% -4.5% -13.4%

Japan $/tonne 2930 - 3177 3054 3827 4080 - 4327 4204 4950 3230 - 3477 3354 4090Y-o-Y % chg -18.6% -15.8% 14.2% -12.0% -10.6% -18.6% -16.7% -12.3% 3.3%

South Korea $/tonne 3069 - 3219 3144 3708 4269 - 4419 4344 4835 3369 - 3519 3444 3765Y-o-Y % chg -13.3% -8.2% -12.4% -10.0% -6.1% -20.8% -5.6% -3.0% -9.4%

Taiwan $/tonne 2868 - 3080 2924 3740 - - - 3168 - 3380 3224 3654Y-o-Y % chg -17.4% -15.2% -6.1% - - - -5.8% -6.6% -6.4%

1. Delivered to warehouse prices for mill shipments in December with large-vol buyers. Excludes alloy surcharges applied by European and US producers2. Unless specified, prices refer to sheet/cut plate 3. Historical prices are quoted as an average 4. For France, prices shown are for 316L material, 5.Coil basis 2mm. 6. Quarto plate 7. US import prices are duty unpaid

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Cold-rolled Stainless Steel Sheet 1,2 & 3

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November 2012 Stainless Steels Market Tracker 3


Grade 304, 20-30mm Grade 316, 20-30mmDec 12 Nov 12 Jan - Dec 12 Dec 12 Nov 12 Jan - Dec 12

Germany €/tonne 1147 - 1310 1228 1280 1367 - 1577 1472 1520Y-o-Y % chg 2.4% 0.3% 6.6% 1.5% 0.8% -1.5%

Italy €tonne 1000 - 1250 1125 1233 1250 - 1500 1375 1436Y-o-Y % chg -4.3% -5.1% 8.7% -1.1% -1.8% 1.7%

France €tonne 1050 - 1250 1150 1249 1330 - 1550 1440 1547Y-o-Y % chg -3.4% -3.4% 2.1% -0.7% -5.6% -0.9%

United Kingdom £/tonne 880 - 1080 980 1013 1100 - 1280 1190 1180Y-o-Y % chg -3.0% -3.4% 16.0% 3.5% 2.1% 4.5%

EU import €tonne 980 - 1100 1040 1140 - - -Y-o-Y % chg -4.1% -5.9% -2.6% - - -

Midwest- Domestic $/lb 0.83 - 0.87 0.83 1.01 1.01 - 1.05 1.00 1.22

Y-o-Y % chg -15.9% -18.4% 22.0% -15.5% -18.2% 17.2%

Import5

- East Coast $/lb 0.77 - 0.80 0.79 0.87 1.03 - 1.13 1.08 1.22Y-o-Y % chg -9.2% -10.3% 3.6% -8.1% -12.2% 8.5%

- West Coast $/lb 0.78 - 0.86 0.82 0.89 0.98 - 1.03 1.01 1.10Y-o-Y % chg -7.9% -7.9% 1.4% -6.9% -8.6% -0.5%

China $/tonne 3077 - 3289 3090 3621 3820 - 4000 3910 4373Y-o-Y % chg -6.4% -11.7% -16.9% -5.2% -8.0% -21.9%

Japan $/tonne 3330 - 3730 3530 4069 4140 - 4535 4338 4913Y-o-Y % chg -7.1% -10.7% -10.6% -5.7% -9.7% -14.7%

South Korea $/tonne 3375 - 3580 3478 3827 4360 - 4550 4455 4777Y-o-Y % chg -2.0% -6.0% -20.6% -1.0% -5.2% -18.4%

Taiwan $/tonne 3380 - 3500 3440 3698 4150 - 4250 4200 4504 Y-o-Y % chg -1.0% -3.8% -15.4% -4.0% -4.5% -20.6%

Grade 304, 50-100mm Grade 316, 50-100mm Dec 12 Nov 12 Jan - Dec 12 Dec 12 Nov 12 Jan - Dec 12

Germany €/tonne 1047 - 1258 1152 1124 6120 - 6300 6210 1226Y-o-Y % chg 6.9% 2.4% 10.4% 413.2% 413.2% 4.6%

Italy €tonne 909 - 1100 1005 1090 1064 - 1240 1152 1180Y-o-Y % chg -0.1% -4.3% 12.6% 2.2% -1.1% -0.4%

France €tonne 976 - 1250 1113 1139 1123 - 1260 1192 1219Y-o-Y % chg 2.3% -3.2% 9.0% 4.8% -0.7% -6.3%

United Kingdom £/tonne 765 - 884 824 855 995 - 1178 1086 1064Y-o-Y % chg 1.5% -3.0% 15.5% 8.2% 3.5% 9.2%

EU import €tonne 884 - 1004 944 1007 - - -Y-o-Y % chg -0.9% -4.1% 1.5% - - -

Midwest- Domestic $/lb 0.85 - 0.88 0.85 1.01 0.97 - 1.07 1.03 1.21

Y-o-Y % chg -8.2% -15.9% 40.1% -9.5% -15.5% 22.6%

Import5

- East Coast $/lb 0.74 - 0.80 0.77 0.86 1.05 - 0.98 1.01 1.14Y-o-Y % chg -9.2% -9.2% 20.8% -9.2% -7.9% 9.6%

China $/tonne 2929 - 3145 2949 3309 3725 - 3859 3792 4230Y-o-Y % chg -2.1% -6.4% -8.6% -4.9% -5.2% -19.3%

Japan $/tonne 3053 - 3357 3205 3642 3858 - 4291 4074 4485Y-o-Y % chg -4.6% -7.1% -6.8% -3.1% -4.1% -21.7%

South Korea $/tonne 3033 - 3335 3184 3459 3964 - 4204 4084 4457Y-o-Y % chg -2.0% -2.0% -22.3% -1.0% 2.1% -16.1%

Taiwan $/tonne 3082 - 3401 3242 3536 3812 - 4059 3936 4296Y-o-Y % chg -1.0% -1.0% -14.2% -4.0% -1.6% -19.5%

1. Ex-mill prices for business negotiated in December with large-volume buyers - excludes alloy surcharges applied by European and US producers

2. Historical prices are quoted as an average 3. Bright-drawn condition 4. Rough turned/peeled condition 5. US import prices are duty unpaid #

Cold-drawn Stainless Steel Bars1,2 & 3

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American Highlights

l Falling surcharges, threat of fiscal cliff keep buyers cautious …l … Despite move by mills to raise base pricesl ThyssenKrupp Stainless USA gearing up for melt shop startup

Market Outlook

North America Stainless Shipments and Inventories All Shapes '000 Tons

2010 2011 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12USA Stainless Shipments All Shapes Total 1581 1786 452 404.5 463.2 448.4 438.2 152.2 154.3 156.7 144.2 156.1 148.1 142.4 160 135.8 157.2

% change year-on-year 16.8% 12.9% 7.2% -0.4% -2.6% -1.2% -3.1% -3.4% 5.9% -9.0% -0.3% 3.7% -6.6% 3.0% -5.1% -6.4% 10.6%USA Stainless Inventory (EOM) All Shapes Total 352 420 417.0 398.3 407.2 393.6 409.5 416.5 413.4 391.6 388.4 391.5 401 413.6 406.1 408.7 418.4

Months 2.7 2.8 2.8 3.0 2.6 2.6 2.8 2.7 2.7 2.5 2.7 2.5 2.7 2.9 2.5 3.0 2.7

% change year-on-year -0.9% 6.5% 18.2% -3.2% -6.5% -8.0% -1.8% -2.1% -5.3% -11.9% -11.9% -9.8% -1.7% -0.9% -6.1% 1.9% 5.0%

2010 2011 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12Canada Stainless Shipments All Shapes Total 164 187 40.1 55.6 45.2 41.9 39.6 15.8 16.1 15.6 13.5 15.1 13.8 13 13.8 12.8 15.2

% change year-on-year 8.1% 13.8% 1.3% 50.7% -5.0% -3.7% -1.2% 1.9% 13.4% -12.8% -3.6% 1.3% -5.5% 11.1% -4.2% -8.6% 10.9%USA Stainless Inventory (EOM) All Shapes Total 34 37 35.2 36.9 40.1 40.7 43.1 42.5 39.5 38.2 40.6 40.5 41.1 42.9 42.3 44 42.3

Months 2.5 2.6 2.7 2.8 2.5 2.9 3.3 2.7 2.5 2.4 3.0 2.7 3.0 3.3 3.1 3.4 2.8

% change year-on-year -13.3% 4.7% 18.1% 14.2% 4.5% 11.4% 22.5% 19.4% -0.8% -3.5% 9.1% 8.6% 16.8% 23.6% 14.3% 30.2% 13.1%

Source: MSCI, Metal Bulletin Research, % y-o-y change is calculated on totals

Quarterly totalYearly total

Caution is the name of the game for the US stainless steel sector with the industry not only facing its lowest raw material surcharges of the year in December, but a number of other headwinds as well. There is heightened fear that should Congressional gridlock continue and the fiscal cliff not be avoided, that weakness in Europe and Asia persist, so the US economy could be propelled into another recession. Import offers are also on the rise. Currently there have not been a lot

of takers, but that could change if the price gap between imported and domestic prices widen. Meanwhile the major cold-rolled stainless mills are hoping that a steep base price hike set for Jan. 1 (of up to US$155/tonne) will let them bolster or in other cases recover some profitability. MBR believes that this move could be successful, especially if nickel and scrap prices continue to firm and if ferro-chrome prices start to recover.

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US Domestic CR 304 2mm prices

Source: MBR

US stainless extras fall to 2012 low keeps buyers on the sidelinesEven with the major US flat-rolled suppliers determined to increase cold-rolled base prices effective Jan. 1 by reducing the functional discount on 200- and 300-series as well as for some 400-series stainless products by 4 percentage points, MBR doubts that this will cause distributors, who have been intent to skinny their inventories down by yearend, to do much, if any pre-buying.

The mills have not raised hot-rolled stainless base prices to the same extent as cold-roll, and despite comparatively strong apparent consumption statistics, base prices actually retreated in November on austenitic material, partially limiting the effects of higher surcharges.

The jury is still out as to whether the latest cold-roll price increase will indeed stick. It is sorely needed by smaller mills to increase their profit margins, but given current headwinds that the industry is facing – not the least of which being the possibility of another recession early next year should the US Congress be unable to reach a deal that prevents the fiscal cliff – buyers are unconvinced. Also, we do not believe that there is much incentive for service centres to beef up their inventories given that mill lead times are so short – four to six weeks by our estimates – and, despite efforts to keep them down, there are also plenty of depot inventories available. As of the end of October US distributors had 2.7 months of inventories on hand, which MBR feels is ample unless there is any sudden surge in demand and that, we believe, is very unlikely. Some service centers, however, are looking at financial hedging mechanisms to manage pricing volatility.

The drop in December raw material surcharges for most popular grades to their lowest level in nearly three years is also making stainless buyers very cautious about buying long. The major domestic flat-roll mills lowered their extras for Type 304 stainless about 7.9% to an average of 72.99/lb., as well as lowering surcharges for Type 316 stainless about 7.7% to an average of $1.0307/lb. and for Type 201 stainless 4.8% to an average of

48.14 cents/lb. Meanwhile, extras for Type 430 stainless, which does not contain nickel, was raised about 9.1 to an average 21.69/lb., largely due to rising iron prices.

It is too early to get a good feel of what direction surcharges will take in January, however, we doubt that nickel could remain as low as it was in the past month or so. Given that it has seen some modest improvement since mid-November and that other alloys, including ferro-chrome, could ride its coattails – particularly as South African charge-chrome suppliers consider production cuts - MBR expects stainless extras to rise in January.

Imports are another concernWhile the very risk averse distributors continue to be very cautious about taking a chance on buying imported material given their longer lead times, there have been some increased buying when the prices are right and given that the US market remains stronger than those in Asia and Europe, MBR believes that there could be some very attractive deals in coming months – especially if the US avoids falling over the fiscal cliff and the dollar does not continue to depreciate. US stainless imports were already up just under 27% year on year in September according to preliminary data from the US Census Bureau.

Underlying demand continues to improve, but very slowlyMBR believes that there could be a slight rise in US stainless demand in the first quarter, although the bump might not be quite so pronounced as it had been in the past few years. That, however, depends on what happens with the domestic and global economies early next year. Growth in the automotive, energy and commercial food service sectors is expected to continue. Home appliance shipments, which were down slightly year on year in October, will depend on the rate of growth of housing starts.

ThyssenKrupp Stainless USA readies for melt shop startupThe new ThyssenKrupp Stainless USA mill in Calvert, AL, which should shortly become one of five new divisions in the Outokumpu group during the next few weeks, has begun buying stainless scrap and ferro-alloys in anticipation of the startup of the melt shop there at the end of the year. Once fully ramped up it is expected that the melt shop, which will have to capacity to produce between 900,000 and 1 million tpy could have a significant impact on the US stainless steel scrap market and could result in the USA becoming a net importer rather than a net exporter of stainless scrap.

The Outokumpu-Inoxum merger is not expected to have much impact on the two companies’ US operations. It could, however, put some pressure on their competitors once the facility is fully ramped up given that the US market is already oversupplied.



(tons) 2010 2011 Q4 11 Q1 12 Q2 12 Q3 12 May-12 Jun-12 Jul-12 Aug-12 Sep-12Mill Shipments Y-o-Y YTD

Plates - Cut Lengths 120,250 143,337 36,969 38,401 39,987 34,571 13,302 13,428 11,112 11,126 12,333 10.1% 6.2%

Plates - In Coils 100,975 118,263 30,216 35,257 29,881 26,023 10,691 9,263 8,216 7,864 9,943 38.3% 3.5%

HR Sheets 101,456 112,446 25,944 61,764 76,638 61,622 28,122 23,640 25,044 27,333 9,245 21.5% 131.2%

HR Strip 16,082 19,481 4,128 3,622 2,347 2,136 867 767 822 555 759 -36.4% -47.2%

CR Sheets 830,484 989,096 240,702 253,624 232,057 244,466 77,101 80,416 76,672 77,914 89,880 28.7% -2.4%

CR Strip 323,723 404,534 89,625 98,210 94,077 89,441 29,410 33,206 30,325 30,278 28,838 -7.3% -10.5%Total Flat 1,492,970 1,787,157 427,584 490,878 474,987 458,259 159,493 160,720 152,191 155,070 150,998 17.9% 4.7%

Total Pipe and Tubing 11,360 8,454 1,765 3,459 3,129 2,912 1,088 1,171 1,080 925 907 -0.2% 42.0%

Wire Rods 52,890 61,733 10,898 11,990 13,215 13,784 4,587 4,408 4,626 4,218 4,940 69.5% -23.3%

HR Bars 45,593 54,666 12,826 14,937 15,449 14,774 5,264 5,133 4,872 4,770 5,132 30.0% 7.9%

CF Bars 95,602 101,168 23,404 27,166 25,881 23,139 8,445 8,806 8,010 8,145 6,984 -13.4% -2.0%

Total Long 194,085 217,567 47,128 54,093 54,545 51,697 18,296 18,347 17,508 17,133 17,056 14.3% -5.9%

Total (excl. semis) 1,698,415 2,013,178 476,477 548,430 532,661 512,868 178,877 180,238 170,779 173,128 168,961 17.4% 3.7%

Apparent Consumption

Plates - Cut Lengths 145,090 188,707 49,715 52,199 60,832 57,574 21,340 22,850 20,562 16,974 20,038 46.9% 22.7%

Plates - In Coils 116,570 180,939 49,281 64,286 56,165 46,853 19,093 17,794 18,384 16,474 11,995 73.3% 27.1%

HR Sheets 110,844 133,749 31,366 69,339 109,212 93,693 40,580 35,054 37,273 43,324 13,096 76.1% 165.9%

HR Strip 14,109 17,974 3,740 3,635 2,597 1,585 969 881 649 386 550 -53.2% -45.1%

CR Sheets 1,139,413 1,295,794 301,857 318,215 315,326 336,532 105,339 109,720 110,281 110,873 115,378 25.3% -2.4%

CR Strip 367,191 449,733 99,037 107,499 105,321 100,000 33,168 37,197 34,782 33,608 31,610 -8.8% -10.8%

Total Flat 1,893,217 2,266,896 534,996 615,173 649,453 636,237 220,489 223,496 221,931 221,639 192,667 23.6% 9.8%

Total Pipe and Tubing 87,887 88,912 22,120 28,329 27,023 27,267 10,933 8,257 8,494 10,190 8,583 25.6% 23.7%Wire Rods 62,870 68,381 15,119 16,869 18,446 18,967 6,916 6,104 7,166 5,204 6,597 79.9% 1.9%

HR Bars 69,904 85,797 20,246 24,230 23,225 20,106 7,482 8,250 6,600 6,435 7,070 16.5% 3.1%

CF Bars 159,482 186,161 43,371 48,812 47,984 42,870 16,322 15,349 16,111 14,780 11,980 -13.4% -2.19%

Total Long 292,256 340,339 78,736 89,911 89,655 81,943 30,720 29,703 29,877 26,419 25,647 8.8% 0.0%Total finished (excl. semis) 2,273,360 2,696,147 635,852 733,413 766,131 745,447 262,142 261,456 260,302 258,248 226,897 21.8% 9.0%

Selected North American Stainless Steel StatisticsChanges

Source: AISI, MSCI, MBR

Source: MSCI

US Import Penetration

lat-rolled import penetration declined in September

though in our view temporarily

0%

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Imports Penetration of CR Sheets vs Total Flats and Total Longs

CR Sheets Total Flat Total Long

Prices to fall again next month but this time a downward trend is not anticipatedThe rather brief rally in austenitic consumption following the summer holidays, which spread north to south through September and was particularly apparent in October, came to a shuddering halt this month. As we detailed in the previous issue of the Stainless Tracker, indicative nickel prices to be used in the December calculation, up until the time of writing at least, had already fallen back towards the summer lows and in euro terms, to levels even lower owing to what had been a strengthening local currency. As a result, buyers keen to stock up in October in advance of higher surcharges in November decided to slow their enquiries in recent weeks and as time wore on, even postpone, though not cancel, earlier bookings. From an average of €1,356/tonne for November, the big four flat-rolled producers (including separate entries for Inoxum’s Nirosta and AST) finally lowered their 304 flat-rolled surcharges by an average of €120/tonne, ranging from Aperam’s €1,220/t- Nirosta’s €1,247/t. While this was the lowest average since March 2010, for moly-containing 316, it was the lowest since February of that year. Of course other stainless steel making raw materials including ferro-chrome and even iron (prime scrap) have been following a similar trend and at €437/t for the popular ferritic (no-nickel) grade 430, were at their lowest since April 2010.

Base prices rollover but announcements for higher levels have already begunWhile surcharges may once again be in retreat, base prices have stabilised as we expected. In the past, prospects



European Highlights

l Austenitic surcharges fall more sharply than expected for Decemberl Supply/side competition intensifies in Germany before the impending mergerl UK buyers are the first to hear of price rises, which should shortly spread

Market Outlook The austenitic price rises seen over October and November, thanks to rising base and alloy surcharges, will be more than just undone in December, as we expected last month. In fact, retreating nickel prices, part compounded by persistent euro versus dollar strength, will ensure that next month’s surcharges will fall to their lowest in nearly three years. Although market sentiment was already weak and the anticipated declines have not dampened a still depressed outlook, service centres have been unable to ship in recent weeks as end-users have asked for delays to pre-ordered material. Though this has actually damaged demand between service centres and users in November and will bolster it in December, it suggests that

market participants recognise that December will, finally, represent a pricing floor. This is particularly the case in Germany where mill-owned service centres have been fighting for new business to challenge Outokumpu/Inoxum market share. Order activity for mills, however, is still disturbingly weak for January across the eurozone though higher orders in the UK may be a leading indicator to European demand and prices in the short term. Indeed Outokumpu have already tabled a £35/tonne base price rise on their next round of deliveries and continental suppliers have just begun attempting to offset December surcharges with €20-30/tonne base-price gains; something we think will fail to succeed, at least before the New Year.

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Q3 09

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European Domestic CR 304 2mm prices

S

Source: MBR

Nickel prices fall to previous summer lows...

...resulting in lower purchasing queries

Source: MBR

Consumer centric industrial production indices

...particular for durable goods

50

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90

110

130

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Jan10

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Oct11

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Apr12

Consumer Durables

Motor Vehicle Registration

2005=1002005=100

Source: MBR

Y-Y % changes in EU manufacturing output The general manufacturing downturn continues...

-15%

-10%

-5%

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Oct10

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Manufacturing Machinery

2005=100



(tonnes) 2010 2011 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Current month Year-to-date

EU15 Exports

Plate 786,736 923,685 53,402 69,373 47,910 92,900 60,474 48,374 66,058 -4.9% 12.4%

HR Sheet 4,515 28,599 26,901 27,312 23,251 24,874 28,098 27,828 21,691 19998.1% 283.1%

HR Strip 8,469 7,383 275 202 136 153 115 110 201 -37.0% -49.9%

Wide Strip 167,482 118,902 859 646 620 647 365 429 399 -95.8% -89.2%

CR Strip 194,396 210,645 6,636 7,388 6,466 15,226 10,882 9,321 11,408 -28.8% -10.8%

CR Sheet 596,770 563,453 18,303 19,974 18,055 18,835 19,895 18,865 14,524 -66.5% -36.8%

Reworked Plate 64,481 112,814 52,937 48,714 48,754 51,762 51,776 52,209 42,893 1282.8% 228.0%

Reworked Strip 23,377 29,669 4,636 5,793 4,371 3,427 6,038 6,021 4,649 139.2% 120.0%

Rod 88,143 76,862 1,673 1,446 1,321 1,280 1,680 2,272 1,444 -60.1% -49.3%

Round Bars 31,663 44,859 6,448 8,213 6,581 7,981 8,101 6,570 3,690 30.8% 103.9%

Other HR Bars 23,457 24,494 3,106 3,591 3,313 3,463 3,637 3,390 2,501 65.2% 93.9%

CF Bars 129,528 140,403 2,534 2,380 2,182 2,463 2,055 1,969 1,272 -84.2% -65.6%

Forged Bars 26,580 36,786 14,435 12,815 12,170 12,368 13,161 13,955 8,096 303.9% 208.9%

Sections 19,883 27,912 3,022 2,356 2,624 2,726 2,389 6,630 1,643 -21.1% 85.2%

Tubes 137,419 141,800 2,572 3,588 2,443 3,663 1,595 2,507 1,040 -90.5% -64.2%

Total 2,302,901 2,488,264 197,740 213,789 180,195 241,769 210,261 200,449 181,509 3.8% 34.3%

EU15 Imports

Plate 236,196 244,328 3,966 12,926 14,797 10,858 14,006 7,400 4,868 -76.7% -14.7%

HR Sheet 3,305 7,111 8,905 8,086 7,955 11,181 9,684 6,528 6,857 8114.1% 418.4%

HR Strip 5,993 5,003 45 58 28 80 31 86 53 -89.7% -68.9%

Wide Strip 33,554 28,340 230 579 704 533 1,083 367 908 -55.6% -60.5%

CR Strip 35,433 41,741 1,752 3,642 842 1,924 4,575 749 182 -93.8% -17.3%

CR Sheet 468,159 496,578 4,408 3,818 4,206 5,146 3,315 3,930 3,566 -91.1% -80.7%

Reworked Plate 13,047 48,404 36,210 39,931 42,827 50,373 42,343 35,447 30,602 3746.8% 347.5%

Reworked Strip 2,916 5,981 1,857 1,696 1,588 3,375 1,052 1,571 1,073 197.1% 133.6%

Rod 62,160 85,128 384 301 548 717 415 649 500 -87.6% -81.6%

Round Bars 13,804 23,020 3,632 4,909 5,037 6,068 3,645 5,749 2,807 77.0% 149.7%

Other HR Bars 11,373 15,765 2,086 1,506 1,290 1,304 1,583 1,828 1,719 43.1% 57.9%

CF Bars 65,487 91,990 693 1,023 959 1,056 1,224 1,332 919 -88.8% -74.3%

Forged Bars 4,482 10,401 6,957 6,529 7,102 7,398 6,825 6,661 5,941 2015.5% 300.5%

Sections 12,297 14,914 536 436 551 490 722 707 597 -36.7% -16.9%

Tubes 42,365 43,494 1,037 1,128 1,209 1,311 1,042 1,132 1,399 -63.0% -47.9%

Total 1,010,569 1,162,199 72,700 86,567 89,642 101,814 91,544 74,135 61,992 -29.4% 31.9%Source: ISSB, Metal Bulletin Research.

Selected European Stainless Steel Statistics% change y-o-y

of surcharge declines in the following month, particularly at this time of year, often encouraged producers and distributors to offer discounts – base price reductions - on the current month to secure a sale and reduce inventory. Following the widespread and extensive losses mills endured in the past quarter, however, no supplier has seemed willing to break ranks; not least as all understand there is no pricing incentive to attract demand in this environment. As a result, for cold-rolled (CR) 304 2mm sheet, average base prices range from roughly €1,030/t (€950/t coil basis) in Italy to €1,120/t in Germany, depending on supplier. Reports of higher assessments in Southern Europe, albeit of just €10/t, have been flatly denied by market participants so though there is agreement that mills are understandably disinclined to lower base prices and deepen their losses, buyers at least in the eurozone are certainly unwilling to allow for base-price hikes at this time.

Indeed one supplier refers to the catastrophic state of demand, even in Northern Europe, in comparison to the past few, post-recessionary years. January order books are far from closed and with less than three full weeks before the end of the stainless working year, there are increasing worries that next year will be the worst year for demand since 2009. As we have detailed before, industrial indicators which guide our assessments of underlying or real demand activity have been negative for some time. Although Romano Prodi’s recent announcement that GDP in Italy should fall by just 0.4% next year, down from 2.4% in 2012, suggests the downturn may not be so acute. Moreover, as stainless stocks have retreated to their lowest levels on record in 2012, an apparent consumption decline may be even less likely to occur, particularly as consumers will seek to replenish inventories in the New Year, especially in Germany where destocking tendencies have been more severe than elsewhere in recent months.

Stable orders in the UK, y-y, suggest the start of 2013 could mark another seasonal rallyWhile demand in Europe is yet to show any signs of seasonal recovery are imminent, in the UK, flat-rolled orders have been increasing in recent weeks encouraging European mills to raise local prices by up to £35/tonne, at least on shipments that have slipped below prevailing levels in North European markets, which at the high end still reside up to €1,180/tonne for CR 304 2mm/2b sheet, €60/tonne above the German average. While price rises on December deliveries would seem unlikely, market participants are anticipating base-price gains for January deliveries as usual when they are also expected to rise across the eurozone. Given that re-sell values for sheet sales to end-users remain under €2,500/tonne in Italy, however, which is just €225/t higher than mill offers for December, compared to the €300/t margin that service centres target, large base price gains in January may struggle to stick initially. Indeed latest nickel prices, which are on course to boost surcharges by up to €70/tonne next month if they remain close to US$16,600/t, up from US$16,094/t for the December calculation, are yet to inspire a rush back to the market. While stocks in Italy may be historically low, in comparison to current demand levels they are actually broadly in-line.



Spot prices within leading Chinese flat-rolled markets have been stabilising

Asian Highlights

l Chinese traders’ prices start to stabilise...l ...but local mills decide to lower their offers, contrary to the regional trendl Stainless fundamentals destined to remain slack, outside of Japan, but higher prices remain likely

Market OutlookAnother round of mixed pricing developments in Asia during the past month has ensured the outlook remains cloudy. While 200 and 400 series pricing remains stable, high nickel-containing 300 series grades have been moving in different directions. Nickel movements from week to week have been influencing austenitic prices in China as usual – and the upward corrections in recent weeks have been well received by speculators who have been boosting stocks - but the changes to the raw material do not explain why some suppliers have succeeded in raising prices whilst others have targeted substantial cuts. What is clear, is that market fundamentals,

with the possible exception of Japan, remain slack as elevated production and relatively subdued, though improving consumption levels continue to characterise the region. While surplus supply conditions may persist for standard grades, demand is still expected to strengthen further in the New Year while shortages are already being recorded for higher-value finishes. Though we have downwardly revised our nickel price forecasts in recent weeks, we still anticipate prices will rise through the next few months, which in turn will bolster consumers’ confidence and, at least temporarily, higher orders.

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Asian Domestic CR 304 2mm prices

Source: MBR

Chinese mills react to last month’s downturn and lower ex-works pricing...Having declined by between RMB400-800/t one month ago, largely tracking downward developments in nickel transactions, spot prices within leading Chinese flat-rolled markets have been stabilising of late. Hot-rolled plate (CMP) prices from traders to consumers have slipped a further RMB100/t for 304 material, to between RMB16,200-16,900/t for 4-10mm gauge respectively but cold-rolled (CR) 304 2mm coil prices have fully recovered to RMB18,200/t; unchanged month-on-month. The recent recovery in nickel prices has again been the main driver in Chinese prices and has also encouraged mills outside of China, such as YUSCO in Taiwan, to raise prices for December delivery, for both local and external customers.

In Japan, meanwhile, the recent publication of largely unprofitable third quarter results has prompted price rise attempts, as in Europe one month ago, and at between Yen10-30/kg, the now three flat-rolled producers, following the October merger of Nisshin and Nippon Metal (Nikkinko), have been largely successful for December deliveries. So much so that Nisshin has tabled a further round for January. Though the pricing outlook has clearly improved for some suppliers in recent weeks – although Japanese mills have been forced to reduce production below planned levels to achieve these gains, by 30% in Nisshin’s case - more profitable Chinese mills, such as TISCO, have adopted a different strategy. Reflecting last month’s movement in Chinese spot prices and

Source: MBR

Taiwanese coil production, ‘000 tonnes ...whilst in Taiwan the downturn is more acute

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Total CR CoilHR Coil

Source: MBR

South Korean coil production, ‘000 tonnes Rising Chinese steel supply is affecting Korean production...

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Total CR CoilHR Coil


'000 tonnes2010 2011 Q1 2012 Q2 2012 Q3 2012e Apr 12 May 12 Jun 12 Jul 12 Aug 12

q-o-q % ch.

y-o-y% ch.

Production 11,254.94 12,590.00 3,433.00 3,648.00 4,325.20 1,216.00 1,216.00 1,216.00 1,441.73 1,441.73 6% 36%Net Imports

HR Shapes -12.72 -18.50 -3.54 0.68 0.49 0.00 0.12 0.57 0.36 0.56HR Bars 2.65 -3.13 -1.22 1.42 1.97 -0.03 -0.73 2.17 1.70 2.04HR Rounds 1.30 -9.51 -6.44 -0.48 3.27 -2.21 -0.93 2.66 3.49 3.66HR Wire rods -0.37 -48.06 -0.25 2.12 1.14 0.40 0.62 1.10 1.46 0.88HR Sheets and plates -163.38 -703.20 -144.18 -69.01 30.82 -61.53 -39.92 32.44 30.47 29.56HR Strips -12.49 -71.20 -4.26 -3.81 0.18 -2.20 -1.85 0.24 0.13 0.18CR Narrow strips -1.21 -54.50 -52.55 -19.00 24.01 -20.64 -25.09 26.72 21.96 23.36CR Wide strips 25.35 -31.25 -7.60 -6.04 0.21 -3.59 -2.61 0.17 0.29 0.16CR Sheets and strips -80.37 -203.69 -20.55 3.41 20.14 -7.92 -9.79 21.12 19.77 19.53

Total HR Sheets, plates and strips -175.87 -774.39 -148.44 -72.83 31.01 -63.74 -41.76 32.67 30.61 29.74Total CR Sheets and strips -55.02 -234.94 -28.14 -2.64 20.28 -11.51 -12.41 21.27 19.87 19.69Total net imports of which -241.25 -1142.75 -240.58 -90.71 82.25 -97.72 -80.18 87.18 79.64 79.92

Total flats -232.10 -1063.83 -229.13 -94.45 75.37 -95.88 -79.26 80.69 72.63 72.78Total longs -9.15 -78.93 -11.45 3.74 6.88 -1.83 -0.92 6.49 7.01 7.13

Source: ISSB, ISSF, CSSC, MBR. Note: * Chinese published statistics are unadjusted but subject to revision for 2011 and 2012.

China stainless steel production and trade statistics


lower nickel prices, mills have again ignored the latest movements in their markets and lowered domestic prices for next month’s delivery. Declines of up to RMB900/t have been posted by both TISCO and Baosteel, whose ex-works prices now mirror the spot (trader sales’) prices in leading markets at just over RMB18,000/t. Some re-rollers, meanwhile, struggling to secure sales, have admitted to dropping their offers below RMB18,000/t in recent weeks and find that they are not alone.

Chinese producers have also been reducing export prices by another US$50/t fob, to just US$2,700/tonne fob for CR 304 coil and US$2,450/t for HR plate in the case of Baosteel, undoing most of the gains achieved since the summer. Though import markets within Asia remain subdued, partly because of oversupply conditions and aggressive offers from some smaller Chinese suppliers, who had offered from as low as US$2,320/t cfr for HR coil, roughly US$150/t below the latest Baosteel list, market participants believe a recovery is imminent. Indeed in Hong Kong, stockists reveal that import bookings which slipped another US$50/t cfr to around US$2,600/t in early November for CR 304 coil, have since disappeared. A depreciating dollar and rising nickel prices is leading speculators to conclude that YUSCO efforts to raise export prices will soon be copied by POSCO and other important suppliers. Moreover, non-prime material demand is rising, often a leading indicator for primary material consumption and third-country suppliers such as Columbus in South Africa, are successfully hiking prices for higher-value, BA finishes. Demand is also increasing as far afield as Australia, particularly for Taiwanese exporters who can compete on price, thanks in part to lower freight rates. The relatively firm demand conditions here and in parts of South East Asia, however, are lost at present to Japanese suppliers who need as much as US$2,800/t fob to cover their operating costs.

While Japanese mills, like their peers in Europe, are being forced to idle surplus capacity, there is little evidence that mills elsewhere in the region are willing to do the same. Some Taiwanese re-rollers have been relatively inactive, at least within Asian import markets in recent months, and Baosteel in China has been undergoing typical November maintenance, but overall, production seems to be rising.

As we had been informed, official Chinese melted statistics from the CSSC implied higher, record-breaking volumes in the third quarter, especially for 200-series production. January-September volumes reached 11.4m tonnes overall, more than 20% up on unrevised data from the year before. By implication, the third-quarter volume alone would have exceeded 4m tonnes for the first time, reaching close to 4.4m tonnes and 36% up year-on-year. Though the figures reported for the nine-month basis are clearly subject to revision, as CSSC accounts for historical output among new producing members, the third quarter will still have been a strong quarter for stainless supply

Asian Highlights

l Chinese traders’ prices start to stabilise...l ...but local mills decide to lower their offers, contrary to the regional trendl Stainless fundamentals destined to remain slack, outside of Japan, but higher prices remain likely

Source: MBR, CSSC

Stainless steel inventory (Wuxi Market. ‘000 tonnes) , Rising austenitic inventories suggest

sentiment may be stronger than prices suggest

0

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400 200 300

and unreflective of weaker stainless demand. Indeed 300-series volumes certainly did rise, albeit by just 4% quarter-on-quarter and 5% year-on-year.

Though surplus supply conditions may well persist in the short term, we would not be surprised if stainless prices move more decisively upwards in Asia. Financial concerns will continue to encourage hikes from higher-cost suppliers in Japan, which market participants believe could only be undone by external suppliers and particularly POSCO; a key supplier to the country. In China, meanwhile, inevitably higher stainless output and higher underlying demand for nickel and other raw materials that such production demands, could conceivably sustain the upward momentum in nickel and now even ferrochrome pricing. While stainless prices could rise on the back of such gains as they invariably do, we suspect that rather like in 2012, such hikes will eventually be corrected should underlying demand fail to spark. At this early stage, there is sadly little to indicate that consumption is going to surge next year though many market participants remain in hope that stainless consumption will track some robust economic growth.


Selected Asian Stainless Steel Statistics '000 tonnes

2010 2011 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Latest month Year-to-dateIndiaProduction1 2,256.7 2,488.4 184.10 184.10 191.62 191.62 191.62 207.70 207.70 207.70 187.44 198.50 -10.7% -10.7%Net ExportsHR Shapes 44.9 9.6 1.08- 0.51- 0.92- 0.63- 1.41 0.15- 0.30 0.01 - - HR Bars -6.3 115.1 14.72 15.24 13.02 15.16 13.74 13.87 14.39 11.37 0.35- - HR Rounds 9.5 7.9 0.65- 1.07 1.14 3.36 2.61 1.65 2.12 2.05 1.18- - HR Wire rods 34.8 2.4 1.97- 1.15- 1.36- 1.17- 0.67- 0.98- 0.75- 0.97- 1.21- - HR Sheets and strips -66.1 -49.6 7.58- 11.43- 6.93- 5.64- 1.60- 5.57- 3.43 0.76 12.87- - CR Sheets and strips -83.9 -48.9 3.11- 0.58 6.70 6.51- 2.94- 4.37- 0.86- 10.93- 18.72- - Apparent consumption 2,323.8 2,451.9 183.77 180.30 179.98 187.06 179.06 203.26 189.06 205.41 221.76 - -16.2% -4.8%South KoreaProductionSection 0.5 1.8 0.49 0.31 0.10 - - 0.41 - - 0.22 - 272.9% 288.3%Bar 42.7 54.0 4.25 3.90 4.42 4.24 4.50 4.39 3.89 4.22 3.88 3.89 -6.8% 5.5%Wire rod 134.0 123.6 9.13 7.93 8.86 9.09 10.50 9.44 7.69 9.18 9.75 9.49 11.6% -10.2%Plate 75.1 79.3 6.40 4.55 6.09 6.53 7.90 6.09 6.85 5.94 5.90 6.36 -33.9% 11.2%HR coil 1,690.6 1,987.4 153.96 166.28 167.16 161.25 180.74 155.04 159.91 149.53 121.06 155.07 -7.1% 8.6%Electric welded tube 12.0 18.6 0.70 0.72 0.61 0.79 0.58 0.89 1.40 0.54 0.78 0.86 -43.4% -54.6%Total 1,942.8 2,246.2 174.23 182.98 186.64 181.11 203.63 175.36 178.34 168.87 140.82 174.81 -7.5% 7.5%Apparent consumptionSection 10.2 13.8 1.30 1.60 1.37 1.32 1.74 1.64 1.35 1.38 1.49 1.25 22.4% 68.8%Bar 64.8 82.1 5.85 5.13 6.32 5.67 6.07 6.48 6.31 5.90 5.24 3.61 -46.9% -9.3%Wire rod 114.5 107.4 8.13 7.50 8.61 8.67 10.24 8.88 7.08 8.46 9.26 9.20 18.2% 2.5%Plate 284.4 318.6 16.74 1.73- 8.09 1.97 5.05 3.99 9.44 3.16- 2.28 2.25- -89.6%HR coil 1,585.6 1,867.0 138.03 130.92 130.08 120.42 153.41 121.44 126.67 113.76 84.19 125.78 -23.4% -16.1%CR coil, sheet and strip 896.7 921.1 67.10 41.49 60.90 49.47 66.48 53.32 50.01 44.37 44.04 46.47 -43.7% -31.4%Electric welded tube 137.7 144.7 10.19 14.88 13.65 14.67 15.09 14.24 13.61 13.14 14.32 14.47 85.0% 31.5%Total 2,059.5 2,388.9 170.05 143.42 154.47 138.04 176.50 142.42 150.85 126.35 102.46 137.58 -35.5% -26.4%TaiwanProductionBar 43.2 67.3 6.37 5.71 6.12 5.68 6.20 5.88 6.01 5.69 5.59 6.60 17.0% 24.0%Pipes (welded) 254.9 311.8 24.74 25.92 16.43 26.95 27.63 24.61 26.62 23.21 25.30 29.91 8.3% 1.7%Coil 1,682.9 1,900.0 148.57 147.48 116.95 156.57 153.00 132.46 147.23 130.53 146.52 173.25 9.0% -2.5%Total 1,726.1 1,967.4 154.93 153.19 123.07 162.26 159.20 138.34 153.24 136.22 152.10 179.86 9.3% -1.7%Apparent consumptionBar 42.7 66.7 6.20 5.56 6.46 5.88 5.93 5.84 5.89 5.66 5.87 6.63 16.8% 26.0%Pipes (welded) 182.2 258.3 23.64 22.83 13.04 23.25 24.38 21.41 23.49 20.54 22.92 27.00 9.4% 13.0%HR Coil 1,610.5 1,831.2 144.49 144.77 114.53 153.23 149.33 128.52 143.53 126.24 142.26 170.34 10.6% -0.7%Total 1,653.2 1,897.9 150.68 150.33 120.99 159.11 155.26 134.36 149.42 131.90 148.13 176.97 10.8% 0.1%JapanProductionHR Shapes 37.2 38.6 3.12 2.55 3.15 3.82 3.20 3.51 2.93 1.67 - - -50.0% 0.7%HR Bars 152.9 160.3 10.28 9.09 11.32 12.95 13.07 13.00 10.76 6.94 - - -50.4% -16.9%HR Rounds 249.8 314.8 21.66 20.53 23.23 24.49 24.35 22.97 23.27 9.37 - - -61.5% -25.9%HR Wire rods 252.2 251.7 19.46 19.44 19.81 20.20 15.57 18.71 19.42 16.04 - - -22.1% -5.4%HR Sheets and strips 2,470.8 2,386.7 141.92 160.09 189.84 187.37 183.96 174.73 189.98 102.41 - - -47.0% -12.1%CR Sheets and strips 2,191.1 2,132.7 125.10 143.90 171.90 168.70 167.62 158.48 173.49 86.55 - - -49.0% -10.6%Total 3,162.9 3,151.8 196.44 217.81 240.91 244.79 238.59 222.98 248.10 239.11 - - -6.4% -6.3%Apparent consumptionHR Shapes 32.3 35.3 2.81 2.43 3.11 3.77 3.02 3.48 2.86 1.44 -53.4% 3.9%HR Bars 142.0 152.5 10.00 5.60 9.87 10.68 10.09 10.20 8.38 3.61 -73.9% -35.9%HR Rounds 251.9 308.7 22.24 16.45 17.90 18.10 16.66 18.72 18.88 3.70 -85.0% -46.7%HR Wire rods 179.9 185.3 15.27 19.04 19.47 19.98 15.25 18.17 19.04 15.51 1.3% 34.9%HR Sheets and strips 2,116.0 2,044.1 126.01 134.90 165.32 145.04 139.91 139.00 154.83 65.03 -61.8% -20.1%CR Sheets and strips 2,173.3 2,113.0 123.43 143.88 171.87 168.65 167.41 158.44 173.43 86.51 -48.0% -9.4%Total 4,895.5 4,838.8 299.77 322.31 387.54 366.22 352.34 348.01 377.42 175.81 -55.3% -16.0%Sources: METI, KOSA, TSIIA, ISSB, MBR

Note: Total does not include the separate cold-rolled production or consumption data as hot-rolled data is gross. 1 italicised Indian production data is estimated.

% change y-o-y


Source: CSSC

Chinese stainless steel production (‘000 tonnes) , This year’s data, particularly for 200-series

supply, has been called into question

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Q1 06

Q3 06

Q1 07

Q3 07

Q1 08

Q3 08

Q1 09

Q3 09

Q1 10

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

400 200 300


Scrap Highlights

l UK price falls reflect earlier raw material declinesl Though inventories are excessive, European price should be supported in the short terml Arrival of Alabama meltshop already bolstering US outlook

European import prices stabilise, though inventories remain excessiveDespite signs of recovery in virgin raw materials markets in recent weeks, stainless scrap prices in the UK had continued to retreat through the penultimate week of November, to just £925/tonne for 18/8 solids, over 10% down month-on-month. As the pound has recently weakened and stainless mills are looking to raise base prices in the short term, however, higher scrap quotes seem likely to materialise in the next few weeks. Indeed in the eurozone, import prices have already recovered last month’s levels to €1,245/tonne cif and traders, so far without success, are looking for even higher levels. Although inventories remain excessive, relative to demand, rising raw materials prices are providing at least temporary upward support to scrap prices.

While this trend may well continue into the New Year, when raw material discounts in scrap are typically reduced as demand from stainless producers surge both in Europe as elsewhere, the longer-term outlook for the region has become gloomier. Whereas scrap merchants had been expecting AST, Inoxum’s largest facility to become the biggest scrap buyer in the region following the takeover by Outokumpu and the closure of steelmaking in Germany, the European Commission has now forced the sale on disputable cold-rolling concentration grounds. Prospective Asian buyers, not alone in considering a Terni purchase, are believed to be more likely to close either one or both furnaces and turn the modern integrated works into a specialist re-rolling facility; giving them better access to European consumers.

US stainless scrap prices retreat, as mill demand weakens Whilst European scrap consumption may be under threat as an unintended result of consolidation, merchants can at least look forward to a much stronger US market, where Outokumpu will shortly realise Thyssen’s dream to start up a 1m tpy meltshop in Alabama. Just as steelmaking plants close in Germany, and potentially Italy, so a second “monster”, to rival North American Stainless, will soon be up and running generating an additional 700,000 tpy of stainless scrap demand, before reverts. Given the likely closures in Europe, less competitive producers in the USA may now feel less threatened by Outokumpu’s arrival. Indeed, contrary to the trend in Europe, stainless producers are replenishing scrap inventories for January, even though there are no shortages.


Source: MBR

US-EU 18/8 scrap premium ($/tonne) Though volatile, the scrap margin should slide as nickel

prices recover in the New Year

-400

-200

0

200

400

600

800

Jan 10

Apr 10

Jul 10

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

EU scrap premium

Source: MBR

Stainless scrap prices ($/tonne) EU stainless import prices should rise next month if nickel

recovers

0

500

1,000

1,500

2,000

2,500

3,000

Oct 09

Apr 10

Oct 10

Apr 11

Oct 11

Apr 12

Oct 12

EU solids 18/8 LME nickel price

Market Outlook Although there are no underlying demand conditions supporting scrap demand at present, at least not in Japan, the USA and Europe where stainless production is in retreat, prices have been showing signs of recovery, regardless. While nickel-price corrections upward may only temporarily support scrap prices, the impending arrival of a new

meltshop in the USA is already encouraging some speculative buying for January. Though the support to European price rises could be limited next year, as stainless capacity is shut down, greater export opportunities may tighten currently slack market fundamentals.

Stainless scrap prices in the UK had continued to retreat

Nickel Prices Specialty Alloy Prices Nickel Premiums Stainless Steel Scrap

LME LME EU Charge EU HC EU 65-70% EU moly Europe 70% USA UK Merchants European, 18/8

Cash 3-month Cr Contract Fe-Cr FeMo Oxide Fe-Ti Melting Plating Solids Turnings Solids Turnings

$/tonne $/tonne $/lb $/lb $/kg $/lb $/kg $/lb $/lb £/tonne £/tonne $/tonne $/tonne

May-12 17,020 17,086 1.35 1.19 33.55 13.90 7.65 0.23 0.55 1140 912 1,822 1,549

Jun-12 16,539 16,610 1.35 1.16 31.91 13.26 7.55 0.23 0.53 1080 864 1,764 1,500

Jul-12 16,167 16,218 1.25 1.11 30.65 12.48 7.54 0.23 0.53 1035 820 1,660 1,451

Aug-12 15,658 15,732 1.25 1.04 28.55 11.36 6.86 0.23 0.53 1020 816 1,682 1,429

Sep-12 17,216 17,283 1.25 0.99 30.46 11.81 6.93 0.23 0.53 1050 840 2,018 1,918

Oct-12 17,245 17,305 1.14 0.96 27.40 11.01 6.41 0.23 0.53 1030 824 1,742 1,459

Nov-12 16,147 16,210 1.10 0.95 27.09 11.01 6.37 0.23 0.51 936 749 1,584 1,347

% change

over 6 mth -5.1% -5.1% -18.5% -20.4% -19.3% -20.8% -16.8% 1.0% -7.8% -17.9% -17.9% -13.0% -13.0%

over 12 mth -9.7% -9.5% -8.3% -15.8% -18.7% -18.7% -10.3% -17.4% -34.6% -15.8% -13.2% -10.6% -10.6%

Q1 11 26,899 26,919 1.26 1.30 43.42 17.42 8.12 0.42 0.83 1,357 1,017 2,210 1,824

Q2 11 24,168 24,191 1.35 1.30 40.26 16.70 8.97 0.48 0.78 1,417 1,075 2,309 1,908

Q3 11 22,043 22,075 1.22 1.19 36.64 14.62 9.00 0.40 0.78 1,242 957 2,133 1,813

Q4 11 18,303 18,328 1.20 1.13 33.00 13.41 7.24 0.28 0.78 1,117 882 1,789 1,516

Q1 12 19,651 19,721 1.15 1.15 34.78 14.26 7.92 0.27 0.69 1,242 973 1,979 1,682

Q2 12 17,146 17,215 1.35 1.18 33.32 13.80 7.72 0.24 0.55 1,163 931 1,896 1,612

Q3 12 16,317 16,381 1.25 1.04 29.89 11.88 7.11 0.23 0.53 1,045 833 1,702 1,460

MBR Stainless Steel Raw Material Prices & Premiums

Source: MBR


Alloy Highlights

l Q1 2013 ferro-chrome benchmark will to be negotiated higherl RKEF nickel pig iron production forecast to increase in early 2013l Molybdenum prices fall in Europe & USA, China re-enters the international market


Furthering the problems for the South African ferro-chrome industry is the instability of power markets and the proposed 16% per annum power price hike by ESKOM until 2019. This will greatly increase the costs of production and could lead to the further shuttering of capacity and business failures. For those that manage to survive, increased costs will boost the incentive for miners to export raw ore products abroad where they are offered long-term, guaranteed power contracts for beneficiation. This will have knock-on effects for the future of South Africa’s ferro-alloy industry.

Recent developments have seen China overtake South Africa and become the world’s largest ferro-chrome producer. It must however, rely on imported material for beneficiation as it has limited domestic ore reserves. The import price of charge chrome has fallen as stainless mills in China have cut purchase prices amid ample supply and a willingness to purchase from domestic producers.

The 4.6% month-on-month (15.6% year-on-year) increase in Chinese ferro-alloy production is believed to be the result of the larger, lower-cost producers filling the shortfall created as smaller producers have been priced of the market with prices lower and demand subdued. November production is likely to be reduced slightly as power subsidies are cut in some regions and increased demand for coal sees production costs rise.

Ferro-chrome Market Outlook

European prices for high-carbon ferro-chrome dipped in mid-November, but closed the month flat at $0.95/lb. Low-carbon material prices declined slightly but gained upwards momentum in the latter half of the month and were trading at $1.98/lb last week. MBR expects the European benchmark contract, that was negotiated at $1.10/lb for Q4 2012 (down from $1.25/lb in Q2 2012), to be settled higher for Q1 2013. South African supply will tighten as production falls following a power buyback scheme with ESKOM. While ferro-alloy producers in South Africa have suffered

from civil unrest and falling demand for their products as stainless production has slowed, the buyback will see them gain a premium on what they initially paid for the power. This will rebuild margins somewhat and producers will be hoping that the combination of tighter supply and a return to market by stainless mills, in response to rising production levels, will see both the benchmark and spot prices climb in early 2013. Business failures could be imminent if the market does not recover and there is no consolidation in the industry.

Metal Bulletin’s spot ferro-chrome index: $0.XX/lb


Alloy Highlights

l Q1 2013 ferro-chrome benchmark will to be negotiated higherl RKEF nickel pig iron production forecast to increase in early 2013l Molybdenum prices fall in Europe & USA, China re-enters the international market

0

10,000

20,000

30,000

40,000

50,000

Jul 07

Jan 08

Jul 08

Jan 09

Jul 09

Jan 10

Jul 10

Jan 11

Jul 11

Jan 12

Jul 12

Source: MBR

LME Nickel Prices ($/tonne)

25

30

35

40

45

50

Jun 10

Oct 10

Feb 11

Jun 11

Oct 11

Feb 12

Jun 12

European Free Market

US Free Market

Source: MBR

Molybdenum Market Outlook

Nickel Market Outlook

A ramp up of stainless steel production in China in line with that in carbon steel will be welcomed by molybdenum producers. China re-entered the international market for molybdenum following sharp price falls in recent months. With global ferro-molybdenum prices falling below the pivotal $12-13/lb level, which is on a par with Chinese production costs, China is now importing increasing quantities of molybdenum. During the third quarter, China imported 3.42m lbs and exported 3.31m lbs of molybdenum-content material. European prices, which held up better

than those in the USA, steadily contracted for 65-70% Mo-content material through the month to $26.95/kg, down 0.5% from late October. This was the first time that prices dropped below $27/kg in 2012. While European stainless production grew 29.5% in September compared to August, it was still a 1.3% decline year-on-year. As a result of the volatility in the market, steelmakers’ demand is continuous, but only for small volumes, with large trades still rare.

Nickel prices held around the $16,000/tonne level in November as signs of a recovery in the US housing market continued and the Euro strengthened. They did not however rise sufficiently t push alloy surcharges for December higher. The monthly average Nickel price of $17,245/tonne in October edged lower this month. Some price rallies are expected before the year-end on the back of short-covering actions, but the fundamental outlook is still weak. LME nickel

stocks stand higher than 33,000 tonnes and now cover more than 10 weeks of supply, only slightly below the 12.6 weeks of stocks held in 2009 at the height of the financial crisis.


With the nickel price in excess of $16,000/tonne, Chinese nickel pig iron production capacity is profitable. This $16,000/tonne level will be tested on the downside as new, lower-cost production capacity, in the form of the rotary kiln electric furnaces, come on stream. This reduces the top end of the cost curve and reduces the imminent economic need to capacity closures. The continued rise in Chinese refined nickel production, in a similar vein the ferro-chrome, relies on imported ore. With nickel prices expected to be next in line following China’s State Reserve Board’s recent purchase of 100,00 tonnes of both zinc and aluminium, MBR believes prices will be lifted as supply is absorbed by these purchases. The long-run effect will be capacity restarts as stainless steel production picks up in the New Year in Asia and Europe, should the sovereign debt crises be resolved.

European Ferro-Molybdenum Prices ($/kg)

Material December Last Month % chg m-o-m Last Year % chg y-o-y

European Average1

€/tonne 304 1,236 1356 -8.9% 1388 -11.0%€/tonne 316 1,853 2023 -8.4% 2179 -15.0%€/tonne 430 437 447 -2.2% 484 -9.8%€/tonne 409 381 387 -1.6% 424 -10.1%

Outokumpu €/tonne 304 1,234 1343 -8.1% 1490 -17.2%€/tonne 316 1,849 2016 -8.3% 2283 -19.0%€/tonne 430 423 412 2.7% 454 -6.8%€/tonne 409 390 378 3.2% 427 -8.7%

USA Average2

$/lb 304 0.730 0.793 -7.9% 0.910 -19.8%$/lb 316 1.030 1.116 -7.7% 1.306 -21.1%$/lb 430 0.217 0.200 8.8% 0.278 -21.9%$/lb 409 0.121 0.107 13.4% 0.165 -26.3%

NAS $/lb 304 0.730 0.793 -7.9% 0.910 -19.8%$/lb 316 1.031 1.116 -7.7% 1.306 -21.1%$/lb 430 0.217 0.199 9.1% 0.286 -24.2%$/lb 409 0.182 0.160 14.0% 0.246 -26.1%

Outokumpu€/tonne 304 1,357 1478 -8.2% 1380 -1.7%€/tonne 316 2,034 2217 -8.3% 2126 -4.3%

NAS $/lb 304 0.623 0.686 -9.2% 0.804 -22.5%$/lb 316 0.888 0.978 -9.3% 1.172 -24.3%

USA

Long Products

Published Alloy Surcharges

Flat Products

Europe

Source: MBR. 1. The European average is an average of Acerinox, Aperam, Outokumpu, TKN, and AST with the exception of historical data (which does not include AST). 2. The USA average is an average of NAS, AK Steel and Allegheny Ludlum.


Alloy Surcharge Highlights

l MBR correctly forecasts alloy surcharge declinesl Austenitic surcharges fall for December as nickel prices slip below $17,000l January surcharges will depend on the effects on reduce alloy production in November


Source: MBR

Historical and forecast European alloy surcharges (€/tonne)

0

1,000

2,000

3,000

4,000

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

304 grade 316 grade

Forecast

Source: MBR

Historical and forecast US alloy surcharges ($/tonne)

0

1,000

2,000

3,000

4,000

5,000

Jan 11

Mar 11

May 11

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

304 grade 316 grade

Forecast

Alloy surchargeoutlook

MBR was correct in forecasting alloy surcharges to be set lower for December deliveries following the slump in nickel and molybdenum prices. With nickel hovering above the $16,100/tonne level, down from over $17,000/tonne in November, mills were forced to pass on the reductions. Some, although not large, nickel price rebounds are expected before the year-end as traders cover their short positions. Price increases will increase the viability of Chinese NPI projects

and higher supply will place upward limits on prices. A rebound is expected in January 2013 as stainless mills and stockists look to rebuild inventory levels ahead of the Chinese New Year holiday. Should this demand be greater than expected, then the expected month-on-month decrease in Chinese ferro-alloy production expected in November could introduce supply tightness, pushing alloy prices higher and thus the alloy surcharge charged by mills.


Global Stainless Steel Output Statistics

Historical and Forecast Stainless Steel Production, Consumption and Market Balance

2010 2011f 2012f Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12

Production

Europe 7,696,232 7,827,400 7,750,000 2,002,476 2,181,358 1,671,099 1,841,299 2,168,002 2,078,578 1,701,915 1,878,905 2,152,658 2,038,842 1,715,761 1,797,000

% chg yoy 28.3% 1.7% -1.0% 60.1% 51.1% 5.3% 7.3% 8.3% -4.7% 1.8% 2.0% -0.7% -1.9% 0.8% -4.4%

Americas 2,129,223 2,487,000 2,748,000 494,539 489,122 584,121 561,441 779,000 598,000 553,000 557,000 607,000 613,000 608,251 613,000

% chg yoy 28.9% 16.8% 10.5% 21.2% 27.6% 21.3% 48.0% 57.5% 22.3% -5.3% -0.8% -22.1% 2.5% 10.0% 10.1%

Asia 20,265,938 21,359,000 23,476,000 4,841,970 5,140,000 5,049,168 5,234,800 5,314,000 5,263,000 5,390,000 5,392,000 5,659,000 5,884,000 6,445,000 5,931,000

% chg yoy 18.0% 5.4% 9.9% 41.4% 19.3% 2.2% 16.2% 9.7% 2.4% 6.8% 3.0% 6.5% 11.8% 19.6% 10.0%

Total World 30,400,393 32,117,100 34,474,000 7,423,985 7,885,479 7,378,388 7,712,540 8,391,102 8,056,878 7,737,115 7,932,005 8,559,858 8,657,742 8,888,613 8,461,000

% chg yoy 20.6% 5.6% 7.3% 43.5% 26.5% 3.7% 15.3% 13.0% 2.2% 4.9% 2.8% 2.0% 7.5% 14.9% 6.7%

Apparent consumption

Europe 6,064,900 6,223,488 5,869,362 1,611,541 1,747,462 1,289,641 1,416,256 1,788,012 1,731,728 1,289,258 1,414,490 1,431,409 1,453,429 1,479,768 1,504,755

% chg yoy -35.0% 2.6% -5.7% -17.2% -20.9% -48.5% -46.9% 11.0% -0.9% 0.0% -0.1% -19.9% -16.1% 14.8% 6.4%

Americas 2,273,360 2,696,147 2,638,439 598,008 567,084 531,045 577,223 736,804 673,432 650,059 635,852 643,458 653,356 665,196 676,429

% chg yoy 12.7% 18.6% -2.1% 41.0% 18.3% -6.1% 5.2% 23.2% 18.8% 22.4% 10.2% -12.7% -3.0% 2.3% 6.4%

Asia 22,468,076 24,763,861 27,493,763 5,335,922 5,684,054 5,571,288 5,876,811 6,001,212 6,030,618 6,106,159 6,625,873 6,705,129 6,808,274 6,931,656 7,048,703

% chg yoy 41.3% 10.2% 11.0% 71.9% 80.9% 37.4% 27.3% 12.5% 6.1% 9.6% 12.7% 11.7% 12.9% 13.5% 6.4%

Total World 30,806,336 33,683,497 36,001,564 7,545,471 7,998,600 7,391,975 7,870,290 8,526,028 8,435,778 8,045,476 8,676,215 8,779,997 8,915,059 9,076,621 9,229,888

% chg yoy 13.1% 9.3% 6.9% 37.8% 37.2% 3.7% 0.5% 13.0% 5.5% 8.8% 10.2% 3.0% 5.7% 12.8% 6.4%

Net Exports

Europe 1,631,332 1,603,912 1,880,638 390,935 433,896 381,458 425,043 379,990 346,850 412,657 464,415 721,249 585,413 235,993 292,245

Americas -144,137 -209,147 109,561 -103,469 -77,962 53,076 -15,782 42,196 -75,432 -97,059 -78,852 -36,458 -40,356 -56,945 -63,429

Asia -2,202,138 -3,404,861 -4,017,763 -493,952 -544,054 -522,120 -642,011 -687,212 -767,618 -716,159 -1,233,873 -1,046,129 -924,274 -486,656 -1,117,703

Total World -405,943 -1,566,397 -1,527,564 -121,486 -113,120 -13,586 -157,750 -134,926 -378,900 -308,361 -744,210 -220,139 -257,317 -188,008 -768,888

Source: MBR. Note: Global net export volumes refer to the difference in global import and export volumes. These are affected by timing issues and non-reporting countries.

2010 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12

Belgium 1,306 1,241 277 349 346 275 117 113 114 119 83 81 111

France 274 300 70 84 82 55 30 28 28 27 22 9 25

Germany 1,506 1,502 368 398 309 302 140 69 117 123 122 99 81

Italy 1,557 1,602 401 438 467 362 155 143 163 160 158 61 143

Spain 844 807 193 248 231 184 87 79 78 75 74 44 66

United Kingdom 279 330 67 94 79 61 27 25 30 24 17 19 25

Sweden 546 586 146 155 133 106 49 47 46 40 20 44 41

Finland 992 1,003 253 284 278 277 109 102 91 85 86 95 96

Austria 53 69 19 15 17 12 5 5 5 7 4 4 4

Total EU15 7,357 7,440 1,795 2,066 1,941 1,633 720 612 671 658 586 456 591

Other Europe2 101 198 84 87 98 83 29 33 33 33 28 28 28

Total Europe 7,458 7,638 1,879 2,153 2,039 1,716 749 645 703 691 613 484 619

% Change Y-o-Y 24.3% 2.4% 2.0% -0.7% -1.9% 0.8% 0.0% -10.3% 7.8% 10.4% 14.3% 0.8% -1.8%

USA 1,889 2,074 458 494 513 509 163 173 174 165 175 171 163

Brazil 240 413 99 113 100 99 39 31 30 39 28 32 40

Total Americas 2,129 2,487 557 607 613 608 202 204 204 204 203 203 203

% Change Y-o-Y 28.9% 16.8% -0.8% -22.1% 2.5% 10.0% -22.1% 2.5% 2.5% 2.5% 10.0% 10.0% 10.0%

South Africa 309 444 104 141 122 120 47 41 41 41 40 40 40

% Change Y-o-Y -20.8% 43.6% 38.8% 8.5% 3.9% 29.7% 8.5% 3.9% 3.9% 3.9% 29.7% 29.7% 29.7%

China 11,255 12,590 3,215 3,433 3,648 4,325 1,144 1,216 1,216 1,216 1,442 1,442 1,442

India 2,257 2,297 552 575 623 569 192 208 208 208 187 199 183

Japan 2,781 3,154 729 782 811 797 272 265 270 276 268 266 263

South Korea 2,290 2,115 556 571 537 497 197 186 180 171 150 177 170

Taiwan 1,683 1,203 340 298 265 258 100 97 91 77 82 85 90

Total Asia 20,266 21,359 5,392 5,659 5,884 6,445 1,905 1,973 1,965 1,947 2,128 2,168 2,148

% Change Y-o-Y 24.5% 5.4% 3.0% 6.5% 11.8% 19.6% 6.7% 12.2% 11.7% 11.5% 19.2% 19.8% 19.7%

Total Stainless 30,162 31,928 7,932 8,560 8,658 8,889 2,903 2,862 2,913 2,883 2,984 2,895 3,010

% Change Y-o-Y 24.0% 5.9% 2.8% 2.0% 7.5% 14.9% 2.3% 5.4% 10.0% 10.4% 17.6% 15.6% 14.1%

Global Stainless Steel Production ('000 tonnes)

Sources: ISSF, AISI, TTG, TSIIA, KOSA, Eurofer, MBR 1 Italicised data is inferred. 2 Includes CIS.


Global Base / Surcharge / Transaction Price Analysis

Stainless Steels M

arket Tracker / Issue 231 / 27 Novem

ber 2012

Published monthly by Metal Bulletin LtdISSN 1478-7261

Produced by: Alistair Ramsay, Colum Staunton, Laima Alavociute, Bradley MacAulay

Metal Bulletin Research Nestor House, Playhouse Yard London EC4 5EXTel: +44 20 7827 9977

Subscription enquiries: Tel: +44 20 7779 7999 Email: [email protected]

MBR DisclaimerPrices and other information contained in this publication have been obtained by Metal Bulletin Research (“MBR”) from various

sources believed to be reliable. This information has not been independently verified by MBR. Those prices and price indices which are evaluated or calculated by MBR represent an approximate evaluation of current levels based upon dealings (if any) that may have been disclosed prior to publication to MBR. Such prices are collated through regular contact with producers, traders and purchasers although not all market segments may be contacted prior to the evaluation, calculation, or publication of any specific price or index. Actual transaction prices will reflect quantities, grades and qualities, credit terms, and many other parameters. The prices are in no sense comparable to the quoted prices of commodities in which a formal futures market exists. Efforts are made to ensure that pricing information is representative, but because of the possibility of human or mechanical error by our sources, MBR, or others, MBR does not guarantee the accuracy, currentness or completeness of any published information. Neither MBR nor any of its providers of information make any warranties, express or implied, as to the results to be obtained from use of

this publication, and make no express or implied warranties of fitness for a particular purpose or use. MBR is not responsible for errors or omissions, or for the results obtained by the use of such information or for any decision made or action taken in reliance on such information or for any consequential, special or similar damages, and MBR disclaims any liability to any person for any loss or damage caused by such errors or omissions, use or decision, including those arising from the negligence of MBR, its employees, or representatives. Evaluations or calculations of prices and price indices by MBR are based upon certain market assumptions and evaluation methodologies, and may not conform to prices or information available from third parties. There may be errors or defects in such assumptions or methodologies that cause resultant evaluations to be inappropriate for use. MBR is not an investment advisor, a financial advisor or a securities broker. The information in this publication has been prepared solely for informational and educational purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, commodity or

instrument or to participate in any particular trading strategy. Such information is intended to be an aid to your own investment process and your investment actions should be solely based upon your own decisions and research

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Current MonthDec Nov Oct Dec Nov Jan-December Jan-December % Change

2012 2012 2012 2011 2011 M-on-M Y-on-Y 2011 2012 Y-on-YBase Prices / Transaction price AsiaCR Coil304 Europe1 1,085 1,085 1073 1125 1130 0.0% -4% 1,134 1,118 -1%

USA 1,247 1,247 1243 1268 1268 0.0% -2% 1,365 1,315 -4%Asia 3,139 3,097 2793 3201 3363 1.3% -2% 3,549 3,000 -15%

HR Plate304 Europe1 1,000 1,000 1477 1475 1518 0.0% -32% 1,523 1,416 -7%

USA 1,030 1,027 1133 1245 1248 0.3% -17% 1,257 1,216 -3%Asia 2,842 2,810 3133 3300 3375 1.1% -14% 3,477 3,173 -9%

CF Bar304 Europe1 1,228 1,228 1228 1200 1225 0.0% 2% 1,269 1,225 -3%

USA 1,873 1,827 1862 2227 2238 2.5% -16% 2,222 1,972 -11%Asia 3,183 3,090 3000 3400 3500 3.0% -6% 3,600 3,292 -9%

HR Bar304 Europe1 1,152 1,152 1152 1125 1129 0.0% 2% 1,124 1,149 2%

USA 1,873 1,827 1861 2227 2238 2.5% -16% 2,222 1,971 -11%Asia 2,949 2,863 2779 3150 3160 3.0% -6% 3,309 3,050 -8%

Alloy Surcharges

Europe1 1,356 1,337 1320 1388 1500 1.4% -2% 1,687 1,392 -18%USA 1,748 1,685 1623 2006 2281 3.7% -13% 2,516 1,841 -27%

Europe1 2,023 2,035 1969 2179 2638 -0.6% -7% 2,672 2,114 -21%USA 2,461 2,393 2292 2879 3244 2.9% -15% 3,601 2,639 -27%

Europe1 2,062 2,006 1977 2049 2214 2.8% 1% 2,477 2,098 -15%USA 1,512 1,449 1388 1772 2045 4.4% -15% 2,281 1,606 -30%

Europe1 3,022 3,012 2925 3122 3355 0.3% -3% 3,789 3,167 -16%USA 2,157 2,082 1977 2584 2964 3.6% -17% 3,338 2,337 -30%

Transaction PricesCR 304 coil Europe 3,128 3,141 3,080 3,414 3,603 -0.4% -8% 3,934 3,224 -18%

USA 2,995 2,932 2,866 3,274 3,549 2.1% -9% 3,881 3,156 -19%Asia 3,139 3,097 2,793 3,201 3,363 1.3% -2% 3,549 3,000 -15%

Notes: All prices $/tonne except 1 €/tonne. Surcharges are for flat products. All numbers in italics are estimates. Latest month transaction prices at the time of writing.

Source: MBR

304 bar

316 bar

Last Month

304 coil

316 coil

% Change

Key Month-on-month Trends in Regional Markets

Prices Consumption Production Lead times Inventory

North America

Europe

Asia

Although stainless mills in Europe are trying to offset severe surcharge declines with some base-price gains, the trend here as in the USA will be distinctly downwards. Nonetheless as raw material prices should actually strengthen, Asian prices seem likely to gather momentum.

Negative trends in prices over December are predicted to be temporary and so many customers will try to bolster stocks this month, ensuring December may actually look stronger than usual. However with just two weeks of business in Europe, consumption will certainly fall here.

Most producers are concentrating on reducing output at present, outside of China where new entrants are supporting an upward trend in overall volumes. Mills are also keen to destock, however, which means supply from mills is not falling so quickly as new production.

Lead times remain low as mill destocking and reduced ordering have offset lower production levels. New business in much of Europe is still paltry outside the UK, however, and some mills fear Q1 could be much worse than usual.

Though mills' inventory remains too high for their management, consumer stocks are decidedly low and in some cases falling further. Chinese stocks are starting to rise, however, as distributors suspect prices may soon be driven upwards by raw materials.

Key month-on-month trends in regional markets

All historical and forecast data contained in this report is available to download from our website: www.metalbulletinresearch.com

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