Oversupply of stainless steel output could develop in US: MEPS

Oversupply of stainless steel output could develop in US: MEPS

London (Platts)--31Aug2006

ThyssenKrupp's recently announced project to build a new stainless steel
plant in the US has sent ripples through the market, according to UK steel
consultancy MEPS (International) Thursday, as the prospect of a new competitor
with up to 1 million mt of additional capacity may give other producers some
cause for concern.
Plans for the new ThyssenKrupp plant include melting and hot rolling
capacity for 4.5 million mt of carbon steel and 1 million mt of stainless
steel, said MEPS.
"It is far from clear whether the North American market has room for new
domestic supply on this scale," said MEPS, adding: "After Allegheny Ludlum
acquired Arcelor's US stainless subsidiary J&L in 2004, there were some
expectations that this would lead to capacity rationalization. But in fact
Allegheny continues to operate the former J&L melt shop at Midland,
Pennsylvania, and also the cold rolling mills there and at Louisville, Ohio."
Moreover, it added, less than 200,000 mt/year of melting capacity was
eliminated from the market with the bankruptcy of Canada's Atlas Stainless a
couple of years ago.
"But at the same time, North American Stainless--part of the Spanish
Acerinox group--has continued to expand its works in Kentucky. NAS has
increasingly come to dominate the market for 304 and other commodity grades of
stainless, while Allegheny and AK Steel attempt to focus more on special
qualities," MEPS said.
NAS is planning to raise melting capacity by 40% to 1.4 million mt/year.
Some of the extra supply will go into stainless long products, and the company
will also increase cold rolled strip output by adding a fifth Z-mill. MEPS
suggested that should ThyssenKrupp plan to produce mostly commodity grades at
its new stainless plant, then it would be competing head-on with NAS.
Meanwhile, the timing of the proposed installation is unclear, and it may
be that the additional capacity would be brought onstream in stages. But
there is certainly a risk that oversupply would be created. And it remains to
be seen whether ThyssenKrupp will get control of Canadian steel producer
Dofasco. If it does, concluded MEPS, the US hot strip mill proposal would be
dropped and it is possible that the stainless project would suffer the same
fate.

For more news, request a free trial to Platts Metals Week at
http://www.platts.com/Request%20More%20Information/ or subscribe now at
http://www.platts.com/infostore/product_info.php?cPath=28_37&products_id=68.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.