UK based MEPS said that a slight pick up in stainless steel demand is expected to develop after the summer holiday period, particularly if the downward movement in raw material costs comes to a halt. Nevertheless, global economic uncertainty is likely to engender a cautious approach to purchasing by many stainless steel customers over the next few months.

Recent decreases in nickel prices are expected to translate into lower stainless selling figures in September 2011. The negative movement in mill input costs could persist. This would result in a further reduction in alloy surcharges in western industrialized nations and, therefore, stainless steel prices in October. However, distributors' inventory levels in these countries are low. Consequently, the usual de-stocking phase during the fourth quarter now appears unlikely. This will, almost certainly, limit the amount of the reduction in transaction values during the period.

High Chinese export volumes could dent market sentiment in the rest of the world in the short term. Material from deals concluded before the summer is soon expected to arrive at destination countries. Domestic mills are not likely to be in a position to lift selling values as they compete with the cheaper imports. However, producers in most regions are planning to restrict output and bring forward maintenance work in a bid to support stainless steel prices during the remainder of 2011.

MEPS expects mill order books to strengthen towards the end of the year. A rise in LME nickel prices is anticipated around this time. This should give distributors more confidence to initiate inventory rebuilding plans.

Seasonally higher consumption should help to boost sales volumes in the first and second quarters. Consequently, stainless steel selling figures are forecast to rise during the first half of 2012. Mill input costs are forecast to increase. These will, almost certainly, add to the upward pressure on transaction values.

(Sourced from MEPS - Stainless Steel Review)