EDITORIAL & OPINION – COMMENTARY — Stainless to join low demand club

The stainless steel market in 1997 was one that transpired from ongoing optimism to that of great uncertainty. Despite the recovery of the global economy from a slower period of growth in 1996, with industrial production in nations belonging to the Organization for Economic Co-operation and Development increasing by 4.2% in 1997, compared with 1.9% in the previous year, the financial crisis in Asia was the predominant concern in the market.

Overall Western World apparent consumption in 1997 grew by approximately 8% to a level in excess of 12.1 million tonnes. Demand was especially buoyant in the U.S. and Western Europe, the economies of which strengthened as a result of improved export markets. Moreover, this growth appears to have been sustained with a recovery in domestic demand, which had been constrained as governments imposed strict austerity measures in order to meet the criteria of the European Monetary Union.

Certainly, the economic weakening in Asia will have a significant impact on global stainless demand as the region (excluding China) accounts for nearly 40% of Western demand.

Western stainless steel demand is expected to decline this year, as investment spending is curtailed. A recovery in the market will depend, to a large extent, on a resumption in growth in Asia. Given the degree of over-investment and limited credit supply, this will most likely take some time to transpire. A resurgence in investment in the region will further hinge on financial reforms in the Japanese banking system, which provided much financing in the region but which is heavily exposed to bad loans. As a result, the problems in the Japanese banking system are unlikely to be remedied in an expedient manner.

— The preceding is an excerpt from World Stainless Statistics, published by Inco.