MECHANICAL CONTRACTING
Market condition and Activity Bulletin — First Quarter 2011
January — March Stainless Steel Pipe
Pricing:→Stainless Steel pricing is forecast to remain relatively flat on most stainless items as base prices are adjusted slightly upwards, but surcharges will moderate. Lead Times: Delivery lead times
remain at 8 - 12 weeks, with fill rates of 25% - 40%. Non-standard material delivery is running 6 - 12 weeks. Comments: There are a lot of
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indicators that suggest that demand is increasing, but it does not at all seem universal. The mills are presenting a solid front with respect to pricing, but most orders are still negotiable. Last quarter pricing was up 3% - 5% following the stock market upwards, pushing up base and surcharges. There does not seem to be sufficient backlog at the mills to sustain yet. There seems to be a lot of Chinese stainless pipe in the U.S. right now. We believe it would not take a big change in activity to push the market into a much busier phase. Indicators from many customers suggest things are picking up and a general lack of inventory could push lead times at the mills out in a hurry.
weld fittings will go up in this range. They also expect seamless fitting will go up as high as 5%. Nickel prices and surcharges on pipe should filter down to fittings especially seamless. Prices were steady during the fourth quarter. Lead Times: Fill rates remain at
80% - 90% or better with lead times of 4 - 6 weeks for commodity material not in stock, as well as specials. Comments: Pipe inventories are
down at the manufacturer's level and they are dependent upon distributor pipe inventories. Manufacturers say they are hearing more “no China” and some, “no Asian.” For the most part, material prices trended up since the beginning of October. As of 12/31/2010, primary nickel prices were at $24,960 /MT; 18-8 Scrap prices were at $2,313/MT and Molybdenum was at $37,000/MT. Conversely, at the beginning of October, primary nickel prices were at $23,775/MT and 18-8 Scrap was at $2,251/MT and Molybdenum was about $33,500/MT. One manufacturer noted there
remains a general uncertainty and lack of confidence in a sustained
BY GARY CARTRIGHT, CONSULTANT FOR PIPING AND EQUIPMENT, INC.
Alan Lipp of Merit Brass shared
the following: “Large PVF distributors maintain a poignantly understandable aversion to risk in reaction to the Q4 - 2008 crash-and- burn of material prices and the resultant trashing of their inventory values. The present challenges for austenitic stainless steel producers extend well beyond nickel’s erratic vacillations. Rising labor costs, rising power costs and shrinking availability (particularly in China), rising costs and tightening of capital, rising export taxes on nickel from Russia and Australia and oversupply of a host of PVF products makes earning a reasonable return on investments even more daunting. The tide may be starting to turn though as evidenced by North American Stainless’ announced intention to increase base prices of stainless bar and angle effective with January 3rd shipments.” He went on to comment, however,
Pipe Surcharges for Stainless based on the published flat rolled surcharges plus a yield adjustment. Information provided by Outokumpu.
Stainless Steel Weld Fittings, 150 and Hi-Pressure Fittings
Pricing: ↑ (Weld Fitting 150#)
(SS Pressure Fittings) Manufacturers forecast a slight 1% - 2-1/2% increase in pricing stainless fittings. Manufacturers are hoping that butt-
economic recovery. In addition, the weak confidence level is further exacerbated by nickel's extreme volatility throughout 2010. Leading mills are diversifying away from nickel based alloys and concentrating on ferritic grades of stainless steels.
Brazil, Russia, India and China — BRIC
The BRIC thesis posits that China and India will become the world’s dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. It’s important to note that the Goldman Sachs thesis isn’t that these countries are a political alliance (like the European Union) or a formal trading association — but they have the potential to form a powerful economic bloc. BRIC is now also used as a more generic marketing term to refer to these four emerging economies. Due to lower labor and production costs, many companies also cite BRIC as a source of foreign expansion opportunity.
that nickel still has been the second best performing base metal (of the six major metals traded on the LME) this year, up nearly 25%. The obvious ongoing questions remains: do fundamentals drive costs / prices of nickel and austenitic stainless steels or are price levels primarily determined by speculative influences? There is no denying the fact that the two
main issues driving speculators appetites (or lack thereof) for nickel and a large suite of U.S. dollar-based commodities, is demand in the emerging economies of the so-call BRIC nations and the level of the dollar (see sidebar).
Stainless Steel Flanges Pricing: →Manufacturers indicate
no change in the pricing of stainless steel flanges during the first quarter 2011. Lead Times: Fill rates are running
20% - 30% with delivery lead times of 4 - 6 weeks for stainless and 6 - 8 weeks for nickel alloys. Specialty items are running 12 - 16 weeks. Comments: Lead times from mills
e Continued on p 34
phc march 2011
www.phcnews.com
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