London (Platts)--5Dec2012/1221 pm EST/1721 GMT

The European stainless steel market currently shows no sign of improvement, with little apparent direction in end-user and stockist demand -- other than for the latter to keep year-end inventories low -- according to the latest market report from stainless steel service center Damstahl.

But, if history repeats itself, distributors will be back in the market in the first quarter, the report added.

Still, with end-use demand flat and likely to stay that way for some months, the region's stainless market is not expected to show any growth for a while, the report said, singling out Italy as having the biggest risk of a decline.

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Indeed, the report believes that the second half of 2012 will most likely prove better than the first half of 2013, in line with some predictions that the key German economy will likely get worse before it improves.

While there is "not much dynamic" at the moment in key end-use sectors like process equipment, automotive and building/construction, Damstahl said, it does expect the oil/gas sector to grow at double-digit rates in Europe next year. Across all sectors, stainless demand is believed likely to improve as the year progresses.

Damstahl said that mill profitability would remain "disappointing" this quarter, with little sign that this will change anytime soon.

The report puts European stainless steel production in Q3 2012 at 1.6 million mt, 2% higher than in the same 2011 quarter.

--Paul Millbank, paul_millbank@platts.com
--Edited by Jeff Barber, jeff_barber@platts.com

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