TORONTO Profits in the flat-rolled stainless steel industry will be "nonexistent for the next three years," according to an executive at Global Stainless Steel Inc.
The arrival of new production capacity in the North American stainless marketparticularly through the Calvert, Ala., mill of Finlands Outokumpu Oyjis likely to "keep prices depressed for the foreseeable future," Brad Beauchamp, vice president of the Mississauga, Ontario-based company, said at the International Nickel Conference in Toronto, hosted by AMM sister publication Metal Bulletin.
"In our opinion, stainless flat-rolled profits will be nonexistent for the next three years," he said.
This could cause some players in the stainless industry to look elsewhere, with AK Steel Corp., West Chester, Ohio, being one company that "might just stay in the carbon business," Beauchamp said.
"Something has to give in North America with stainless. Outokumpu is just going to get bigger and stronger," he said. "Service centers that sell all flat-rolled products, such as carbon, aluminum, stainless and red metals, are finding the risk is not worth the reward in stainless."
An AK Steel spokesman told AMM that the company isnt even contemplating a withdrawal from the stainless market.
"In regard to stainless steel, and as we reported during our first-quarter 2013 earnings conference call, sales activity has remained steady, with a slight uptick recently. We are focused on the higher-value-added segments and, thus far in 2013, our automotive exhaust grades have exhibited stronger demand. That trend is expected to continue for the foreseeable future," the spokesman said.
Meanwhile, weakness in the stainless sector has seen mill lead times come down to as low as five to six weeks, while inventory levels have come down to slightly more than two months supply from four months supply, Beauchamp said.
However, lower prices will be good for the North American manufacturing sector, he added, with domestic stainless mills having the ability to look into the export sector to compensate for flat local demand.
Beauchamp emphasized the need for cooperation between the nickel and stainless markets, particularly with stainless representing 73 percent of nickel consumption.
"Nickel mines, mills and distribution must work together to help calm the waters, ensure we all make money and better understand each others need to do so," he said.