To Our Valued Customers,
As we head into the summer months, we would like to take a moment to provide an update on current market conditions. There is a lot of conflicting information and continued unpredictability in our marketplace. Over the last few months, there have been a few topics that we have been asked about frequently.
For Stainless Steel grades, we have been asked “Are prices up or are they down?” For commodity sheet product, there is tremendous downward pressure on pricing due to the amount of available melt capacity globally. However, for specialty strip pricing on product rolled in the USA, prices have not retreated. There are still many items, such as Tempered 301 stainless, where availability is limited or nonexistent outside the USA. We do not envision any pricing erosion on specialty products through the balance of this year and into the next.
Supply chain stability and risk management are critical aspects of the steel business that Ulbrich remains focused on. Although there may be temporary buying opportunities for certain products from Asia, specifically from Chinese sources, we are extremely cautious when shifting performing supply chains. Proper stewardship in our market means being cognizant of our geopolitical environment (the ongoing Section 232 tariffs, further anti-dumping cases, the decarbonization initiatives and future taxes, military conflicts, congressional initiatives like the CHIPs act, etc.). We continue to navigate this minefield to make proper supply chain decisions for our customers.
Lead times have been reduced significantly in most areas of the stainless-steel market. For our service center group, excess capacities at the major USA melt mills mean we buy most items at a 10 to 14-week lead time. At our Specialty Reroll Mill in Wallingford, CT, we have reduced lead times from a record 30 weeks to around 12 weeks. This is through a combination of improved throughput and our efforts to work with core customers to balance demand. The current lead times make it much easier for Ulbrich and our customers to align purchases with forecasted demand and react quickly when needs arise. We anticipate lead times to stay where they are for a while, especially while there is excess melt capacity across the globe.
Aerospace continues to stay strong, putting a strain on nickel-based alloys and titanium melt capacity. In some cases, our raw material suppliers are quoting us in excess of 52 weeks. For these products, we need to work closely with our customers to ensure we have raw material available to support demands. The forecasting process remains extremely critical. We do not anticipate this trend changing as forecasts for commercial and defense aircraft builds show exponential strength through the next decade.
Surcharges & Nickel
We continue to monitor nickel closely due to increased usage from emerging markets (like EV’s and other battery applications) and the volatility from the LME. Warehouse inventories around the globe remain depressed. However, commodity pricing for nickel remains high. And there is chatter about introducing lower nickel grades into the marketplace, potentially impacting pricing. We advise all customers to be careful of this volatility when signing their own customer agreements. Commodity pricing could change at any time.
While we realize this update may create more questions, our intent is to provide transparency on how Ulbrich is positioning itself in the market to best service our customers. We feel there are many conflicting influences, and it’s difficult to make long-term decisions or predict where we will be in 6 months. The Ulbrich team is focused on shipping product to our valued customers and navigating the continued volatility. This includes our entire team of Sales, Purchasing, Technical Support, and Operations.
To close, we would like to thank all our customers for working with us during these unpredictable times. Your business is appreciated by the entire Ulbrich family and our team members.
Group Chief Operating Officer