NEW YORK Stainless steel
prices are currently at "unsustainable levels," Allegheny
Technologies Inc. (ATI) chairman, president and chief executive
officer Richard Harshman told AMM.
Harshman said that the
Pittsburgh-based companys recent attempt to implement a
base price increase (
amm.com, April 9) was aimed at bolstering margins
after a 12-percent base price increase effective Jan. 1 failed
"That price held for less than
two months and began to erode, and today the price is back
where it was at the end of 2012," he said. "Base prices, in my
view, continue to be at unsustainable levels long-term, because
no producer can make an acceptable return on capital
Harshman acknowledged that the
announced base price increase effective May 6 didnt take
hold in the market (
amm.com, April 24), which he said indicates
ongoing weakness in stainless market fundamentals. He recently
described demand as "sluggish" (
amm.com, April 24).
"When you see a base price
increase that is meaningful and holds for a sustained period of
time, that is indicative of improving fundamentals," he said.
"Until you see that change, which has to be a fundamental
drive, the stainless market is going to be a challenge."
Part of the problem in raising
base prices is the influence of other producers and their
approach to pricing, Harshman acknowledged.
"By holding, it means: Do you
get that higher realized price in the market? If you do, then
its holding. If you dont, its because either
another producer doesnt think its the right time to
raise prices, or they do and then they cut special deals in the
background and it erodes the price," he said.
"Volume is important, just like
it is in the carbon steel business, because of the fixed-cost
structure on the front end of your business, mainly melt shops
and the hot-rolling. So (its a question of): Are you
going to be the first one to blink? Sometimes we think the
fundamentals justify a price increase, so we hold out. But if
we begin to lose orders that are important and are strategic
and are significant to us from an overall scale standpoint,
then well back off," Harshman said.
"Were generally not the
kind of company that has the attitude to be the first to cut or
lower prices. We may be one of the first to raise prices,
because we like a return on capital employed," he added.
Meanwhile, Harshman said there
may be grounds for a trade case against Chinese stainless
imports, which have had a "negative effect on pricing" after a
slowdown in the Chinese economy in spring 2012 prompted a wave
"In our view, that was a surge
of imports that violates the trade laws and arguably was being
dumped. The challenge that any U.S. producer has under the
trade laws is that you have to prove a sustained period of
damage before you can contemplate bringing a trade case. That
sustained period, generally speaking, is about two years. So if
that (surge) started around the middle part of 2012 and
were only in the middle of 2013 now, we still have one
year," he said.
"It is complicated to bring a
trade case, and expensive ... so the industry needs to be sure
of their facts, and that takes time," Harshman said. "We will
continue to monitor the situation, and if the facts remain as
they are, we would certainly look at that."