In our previous analyses in recent months, we have dwelt upon the crisis, the measures against the crisis and the possible effects of the measures in question. Certain measures have been implemented by the Turkish government in recent months, boosting dynamism in the automotive, white goods and furniture sectors in the country. The domestic stainless sector has also been influenced by the increased activity in question, with market players particularly relieved by the dynamism in the automotive and white good sectors. While it is clear that all measures constitute just a temporary relaxation for the sector and its players, it is expected that the crisis and its effects will continue for some time yet. In particular, the export side is almost closed down at the current time. According to the views from Europe and the expectations from financial bodies such as the IMF, the economic contraction is likely to continue in 2009. For industries to maintain their production levels, it is essential that the Turkish government should continue to implement stimulus measures in order to boost consumption.
Meanwhile, stainless prices in Turkey are likely increase €100/mt in the near future under the influence of the abovementioned increased dynamism and the price uptrend in the international markets. However, from mid-June the global price uptrend is expected to slow down and then stop, as the major economies such as US and Europe will enter their holiday season and Ramadan will start after mid-August. A price downtrend may not happen; however, the price increase trend seems likely to stop. In a world of instant and widespread communication, producers can quickly sense any decreases in demand and are able to reduce their production very rapidly. If there had been no production reduction in recent months, then supplies today would be huge and the sector might already have experienced a big collapse. This can be said not only for the stainless sector but for all iron and steel sectors in general. In the current supply-and-demand balance, although demand exceeds supply for now and a short-term price increase is being observed, it should be remembered that the factories are not operating at their full capacities. For this reason, a sharp, big increase in prices is unlikely even in the event of rising demand. Let's say there is an uptrend in demand and prices are going up, even, this so-called uptrend would trigger increased supplies with producers activating their previously passive production capacities. In the current picture, it seems that a lot of factories have reduced their production by up to 50 percent Thus, even if demand doubled, supplies would be able to counterbalance it.
Looking at the local Turkish stainless market, European origin 304/2B grade 2 mm stainless coil prices are currently at €1,900-2,000/mt and these price levels are thought likely to increase by €100/mt over the coming month. Meanwhile, over the same period a similar increase is also expected to be seen for Far Eastern origin material, as well as for stainless steel fittings and stainless pipes. Considering that nickel prices have reached $12,000-13,000/mt and the base stainless steel prices have gained stability, it is natural that stainless steel market prices will move on a stable trend after the expected €100/mt increase. Nevertheless, there may be a slight softening in stainless steel market prices under the influence of the expected decrease in demand in the summer season. As is known, when alloy extras go up in line with the global price increase of nickel, these extras also push up the prices of stainless steel. After the summer, demand for all metals in the international markets will increase.
In short, the supply-and-demand balance in the overall markets and the development of prices should be monitored carefully as prices are now being determined not by demand alone but by the equilibrium between supply and demand in particular. The best example of this is that the recent slight increase in demand affected prices immediately despite production cuts.