An air of optimism has been apparent in European stainless markets in may 2009, especially for coil products, despite there being no sign of an upturn in underlying demand. After many months of plummeting transaction values, basis prices have increased, with alloy surcharges to follow suit in June 2009. Perhaps, for those whose business is buying and selling stainless steel, this is reason enough to smile.
There are numerous factors to suggest that the bottom of the current cycle has been reached. Producers' capacities and inventories have been cut to reflect current activity levels. As a result, delivery leadtimes are growing and some items may soon be in short supply. Furthermore, recently published indices in both the UK and Germany showed improved confidence levels among business professionals.
The long products market, though, has not turned around yet. Demand is still depressed and can largely be satisfied by what are still relatively inflated stock levels. Participants are waiting on impending rising alloy surcharges to boost transaction values.
However, the current nickel value is not supported by fundamentals. Consumption is clearly depressed and LME stocks remain at extremely high numbers. Buyers are, therefore, unconvinced that surcharges will continue climbing and so will not yet purchase speculatively.
The situation is similar in the USA. The discounts on the mills' list prices have been reduced - which in reality means an advance in the basis figure. Customers are still cautious, though, and will not buy for stock until a genuine upturn in consumer confidence can be demonstrated.
Some Asian producers have increased their selling values in recent weeks, ostensibly to reflect the higher cost of nickel. However, Posco, of Korea, had to cut its domestic stainless prices during May, in an attempt to fend off cheaper imports from Taiwan and China.