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Home > MEPS Steel News - 30.11.2015

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 November 23.

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 - Stainless Steel Review - November Issue

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