MEPS’ recent reviews of the global stainless steel market have revealed a mood of cautious optimism - a belief that the bottom of the business cycle had been passed and that sales volumes and prices would start to increase, albeit steadily, this year. While that belief persists, there is little empirical evidence, as yet, to suggest that a recovery is under way.

In Europe, business activity has slowed in February, after a busy January. Distributors and end-users were sufficiently optimistic to rebuild their, admittedly, depleted inventories at the beginning of the year. However, while participants in some sectors and some countries report improved activity, there has been no significant upturn in underlying demand and orders on the mills have slowed.

Moreover, stockists complain that their profit margins are being squeezed, as end-users refuse to accept any basis price hikes agreed with the producers. In fact, as the mills have tried to follow January’s small advances with further increments during February, the distributors have been, for the most part unwilling to pay more. Consequently, EU average transaction values for type 304 cold rolled coil have risen by only 1.1 percent since December.

The situation is perhaps, more disappointing in the United States. As in Europe, there has been a rise in the volume of orders placed on the mills, in the early part of the year. Although there are encouraging signs from some consuming industries, the increased activity is predominantly due to inventory replenishment. Furthermore, as basis figures have not been changed in the past two months, effective selling values for grade 304 CRC have risen by only US$10 per tonne.

In the Far East, the producers’ list prices respond quite quickly to fluctuations in raw material costs. In this instance, most official offers for 300 series material have been increased to reflect higher nickel costs. However, as in the West, buyers have been influenced by subdued demand and advances in market values for stainless steel have been moderate.

Notwithstanding the disappointing results described above, we still believe that the stainless steel market will move in a positive direction in the near future. Economic indicators continue to suggest an upturn in real demand. Consequently, producers should be able to maintain basis values, where applicable, at higher levels during the first half of 2014 than in the previous six month period.

Additionally, the Indonesian ore export ban will reduce the global surplus in nickel supply in the near term. This will put upward pressure on commodity prices and promote higher nickel values during the second quarter.