STAINLESS STEEL AND NICKEL PRICE FORECASTS

NORTH AMERICAN HOT ROLLED STAINLESS TYPE 316

Stainless selling prices are set for a hard landing as alloy surcharges will show significant month on month declines until at least October. Type 316 figures for September are almost $US1,100 below those in August and October's forecast to be another $US670 per tonne lower. Moreover, basis values are not likely to improve in the short term. A noticeable transaction price recovery, is not, therefore, anticipated until the first quarter of 2008 due to weaker market conditions.

Distributors are expected to re-evaluate their stock levels early in the New Year. Mill orders should then increase. However, we do not anticipate the same upturn as recorded at the beginning of 2006. Buyers will remain wary as they continue to count the cost of the recent sudden collapse in the value of their inventories. For this reason only a steady transaction price improvement is forecast for 2008.

NICKEL

As predicted in July, nickel prices fell under the $US30,000 per tonne mark during August. However, the rate at which it continued to drop was greater than anticipated, with values falling to almost $US25,000 per tonne by the middle of the month. Stocks at the LME climbed above 20,000 tonnes for the first time since May 2006, when, at that time the cash figure stood at around $US21,000 per tonne. Stainless mills are not expected to increase nickel purchases while high volatility remains. This should result in stock climbing higher, causing the nickel cash monthly average figure to slip further in the short term. Prices are forecast to stabilise during the fourth quarter of 2007 and into 2008 as stability returns to the stainless market.