Johannesburg - The South African stainless steel industry believes the sector may have reached a turning point, but analysts remain sceptical.

"Personally, I think we have seen the bottom of this slowdown," said Southern Africa Stainless Steel Development Association (Sassda) chairperson Sampie van Rooyen in a media statement.

"We saw a very buoyant South African market for the first six months of the year. However, when global markets collapsed during August and September 2008, we experienced global as well as South African steel markets reversing from buoyancy to total collapse.

"We just have to bide our time now. Things changed so fast. Everyone who has survived the past couple of months has probably gained more experience than they had in the past 20 years," said Van Rooyen.

But analyst Willem Venter of Prescient Securities said calling the bottom of the downturn in the stainless steel industry also means predicting the end of the global economic downturn.

Stainless steel products like spoons and new-age kitchen appliances come as luxury to many, and in a downturn "nobody needs" these kind of items, added Venter.

"If there is no demand, there is no demand", he said.

Stainless steel differs from normal steel in that chrome and nickel are added to the steel to give it its non-corrosive, anti-rust properties.

The low price of nickel has provided some relief to stainless steel markets. According to the International Stainless Steel Forum (ISSF), nickel accounted for about 60% of the cost of austenitic stainless steel (one of the three main types of stainless steel).

In 2007 nickel rose to a high of $53 000 per tonne from about $17 000 the previous year, putting pressure on stainless steel input prices. The nickel price subsequently fell below $9 000 and currently stands at around $12 650 per tonne.

The ISSF predicts that demand for all flat-rolled stainless steel products will grow in 2009 to reach a decade high in 2010. However, the demand for long products will dip in 2009, recovering in 2010.

Long steel products are used to produce bars and wires. Flat steel products are mostly used by infrastructure and automobile industries in the shape of coils, sheets and strips.

Spokesperson for ArcelorMittal SA Sven Lunsche was less sure of the prospects for the steel market: "At the moment the signs of a recovery are a while away; given a visibility of only a month (for ArcelorMittal) - at the most two months - it is virtually impossible to predict the future."

He said: "We don't foresee an imminent recovery in steel demand, or a sustainable upturn in steel prices."

- Fin24.com