NEW YORK Stainless steel distributors have seen sluggish demand in the opening weeks of the new year, but while volumes remain below traditional levels, some market players say they are hopeful a pickup is in the cards.
"I would say its tepid, but I do feel that were right around the corner from improved demand. I just feel that were due for a cyclical upturn," a source at one Midwest stainless distributor said, citing continued strong automotive demand, a pickup in the housing market and increased consumer spending. "The general economic news is pointing upnot 90 degrees, but maybe three degrees. That will eventually trickle down to our markets."
Also lending the market some possible near-term support is the fact that nickel prices have been fairly stable on the London Metal Exchange, which means Februarys surcharges likely will be close to this months levels. The cash nickel contract on the LME settled at $17,385 per tonne ($7.89 per pound) in official trading Jan. 17, up just 0.6 percent from $17,285 per tonne ($7.84 per pound) the previous day.
That kind of pricing stabilitylargely absent in a volatile 2012can encourage consumers to come back into the market, sources say.
"What I like so far this year is that at least the surcharge is steady. Its the most stable its been in many months," an East Coast distributor source said.
Meanwhile, price increases implemented on commodity flat-rolled products by domestic mills at the beginning of January are said to be holding.
"Certainly the mills are very interested (in making them stick); they claim they need it. Theyre concerned about any further deterioration," the East Coast distributor source said.
But while some players say they expect stronger demand ahead, sources said that so far demand in January has been below expectations, particularly compared with the strong start to 2012.
"Its better than December but not quite great or active," the East Coast distributor source said.
The sluggish activity so far in January follows a year of contraction in stainless distributor shipments.
Shipments by U.S. stainless steel distributors totaled 1.76 million tons last year, down 1.4 percent from 1.79 million tons in 2011, according to the latest data from the Metals Service Center Institute (MSCI).
Decembers shipments totaled 121,100 tons, down 1.7 percent from 123,100 tons a year earlier, and inventory levels rose to 3.7 months supply last month, the highest level recorded by MSCI in at least two years.