Downtrend continues in stainless markets

The slight increase trend in nickel prices observed in December has rapidly disappeared. Nickel prices had increased to $11,000/mt for cash payments but now have fallen back to the level of $9,000/mt. As a matter of fact, these developments have not influenced the price downtrend in the stainless steel markets. The decrease movement in stainless products has been influential to such a degree that, overall, producers have cut their production by approximately 60 percent. Despite all these production cuts, however, prices are still declining due to the fact that there has been no revival in overall demand. Thus, 304/2B grade 2 mm thick stainless coil prices in the local European markets have this week been at €1,700-1,900/mt excluding VAT.

Looking at Turkey, this market is a net importer and the prices usually follow the general global price trend with one or two months' delay. For this reason, prices are currently falling in this market; however, they have not yet dropped down to the same levels as European prices. Traders are not decreasing their prices levels below certain levels as they do not wish to reduce the value of their materials. Traders have been cautious as regards material purchases over the past two months and they are trying to exert control over the sector in order to sell their materials at the best possible prices. As a good example, the abovementioned 304/2B grade 2 mm thick stainless coil prices are currently at €2,200-2,400/mt excluding VAT in the local Turkish market.

A general problem in Turkey is the tightness of the cash flow. With the contraction of demand, many company with poor cash levels have been experiencing hard times and delaying their payments. This situation has contributed to halting the cash flow in the stainless markets in this country. Sellers that do not have much cash are not able to buy new material or are insisting on strict payment terms when selling material. Also, they are not willing to sell material if the payment terms are not for cash. All these developments have nearly caused the sector to grind to a halt. The trading volume has shrunk by approx. 50 percent, except for the companies that have been working with the private sector. Turkey is an exporter country in certain sectors and, accordingly, due the recession in Europe, a lot of the exporting sectors in Turkey (such as automotive) have experienced considerable production cuts. Thus, demand for stainless materials has declined quickly in Turkey, just as in the overall global markets.

When will all these downtrending movements come to an end? Looking at the nickel prices, it can be said that the prices of $8,000-9,000/mt are the bottom levels. These prices were previously pushed down to lower levels; however, they increased again due to a good response from purchasers. Thus, it can be said that the abovementioned price range is the bottom line. According to the abovementioned price range, it can be said that there may be some further decreases in stainless prices and then they will have been stabilized. The main problem in the overall stainless markets is the lack of balance between supply and demand. Due to current cuts in supply, it seems that the stocks on the ground all over the world are unlikely to melt. In order for this melting of stocks to occur, the spring months need to come, accompanied by a revival in the relevant sectors. Especially, a revival in construction (locomotive sector) may increase overall consumption in the global markets. However, while considering all the above, it should be taken into consideration that the global financial crisis will possibly not deepen further and will possibly see a certain amelioration.

Price levels in the local Turkish stainless markets in the Istanbul region (prices are excluding VAT) are as follows: