2016 FORECAST TO BE
ANOTHER DOWNBEAT YEAR FOR STAINLESS STEEL
The outlook for the global stainless steel
market is disappointing, as purchasing activity remains weak and
transaction values continue to slide. The downward price trend
encourages buyers to delay placing orders, in the belief they may
get a better deal if they wait. This adds to the usual, seasonal
pattern, whereby stockists and end-users reduce their purchase
volumes, in order to minimise their year-end inventories.
Market participants have, for some time, been, cautiously,
predicting some improvement in business conditions during 2016.
However, as yet, there have been few indications of any impending
pickup in the fortunes of stainless steel-consuming industries.
Furthermore, the recent sharp drop in the LME nickel price has led
MEPS to moderate its forecast for increases in the cost of the metal
and, consequently, stainless steel selling figures during the first
half of next year. Nickel costs are expected to peak in May 2016,
with stainless steel prices reaching a high point during the
following month. However, our forecast world average figure for type
304 cold rolled coil, in June, is only 11 percent higher than the
low value in the cycle, recorded this month. Prices are predicted to
soften, slightly, thereafter.
Nickel, along with other commodities, suffered a drop in value in
the wake of the Paris terror attacks and the suggestion that the US
Federal Reserve will raise interest rates in December. LME nickel
daily figures reached their lowest mark since May 2003. Commodity
prices have rebounded, somewhat, after reaching a minimum level on
The prospect of a sustained recovery in nickel prices is hampered by
the combination of weak demand from stainless steelmakers,
production overcapacity and extensive existing inventories. Although
LME stocks have fallen from a peak of over 470,000 tonnes, in June,
the current figure of around 411,000 tonnes remains far too high to
support any fundamentals-driven price rally.
Global production capacity, for nickel, remains far in excess of the
present, subdued demand from the stainless steel industry. Chinese
producers are due to meet, in late November, to discuss the
possibility of reducing nickel output. Other miners, around the
world, are also being forced to consider suspending operations at
their least cost-effective facilities.
If these measures can be combined with an upturn in stainless steel
consumption, there may be some hope of a recovery in nickel and
stainless steel prices.
Source: MEPS -
Review - November Issue
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