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September is traditionally a month that marks a seasonal upturn in the stainless steel market cycle. As producers and consumers return from a period of low activity, resulting from the summer holidays, stockists and end-users rebuild their inventories. The consequent uptick in demand puts upward pressure on prices. This, in turn, leads to speculative purchasing as buyers anticipate a positive price trend lasting several months.
That’s how it used to be. In recent years, though, the pattern has been less predictable. Since the global financial crisis, businesses throughout the supply chain are reluctant to hold stock. Credit is more difficult to obtain. Competition and oversupply have increased. Continuing weak demand and the long-term downtrend in nickel values have made it very risky to buy more material than is necessary to cover real orders.
As a result, the market has tended to remain quite flat. Neither buying activity nor prices have increased, post-summer, as much as they were expected to do, pre-crisis.
This year, however, there has been a subtle change. Many supply chain participants reported unexpectedly high activity levels during the traditionally slow summer months. Producers in many countries have introduced price hikes that do not merely reflect changes in input costs. These increases have not been universally accepted, as yet, but the indications are that most market players are supportive of this direction.
The justification for these moves is that the mills have been unprofitable for too long and that they need higher selling values to cover their production costs. It could be argued that this has been the case for a long time. Therefore, we must ask whether it is significant that this is happening now.
Western economies, in particular, have been “bumping along the bottom” for some time. However, in recent months, positive GDP growth figures and improved forecasts have been reported in several countries.
MEPS are, certainly, not so brave as to “call the recovery”, here and now. MEPS does, however, predict a steady, upward trend in global stainless steel transaction values during the next six months.
