LONDON --Prices for nickel-based or austenitic steel are expected to bottom out by the end of this year and pick up early next year as credit restrictions ease and customers start to rebuild inventories, U.K. steel consultancy and price-research firm MEPS said Tuesday.

The two grades of cold rolled coil, grades 304 and 316, are expected to fall 17% and 13% respectively by the end of the year to $3,800 a metric ton and $6,200 a ton from their June level.

The large drop is due to a steep fall in the cost of LME nickel which has led distributors to stop buying stainless steel in hopes of sourcing the product at cheaper prices. Bigger falls were noted in grade 316 prices than grade 304 prices, MEPS said.

The U.K. consultancy firm expects demand will remain low in the short term. "The fear of additional sharp corrections in nickel prices is likely to prompt buyers to restrict stainless purchases until the end of the year. Credit constraints are also predicted to dampen end user demand further," MEPS said.

Demand should pick up early in 2009. "Distributors in the west may look to refill depleted stock levels in preparation for traditionally stronger sales in the spring. Consequently, a modest recovery in prices is envisaged during the first half of next year," MEPS said.

European stainless-steel prices could face even further downward pressure if an E.U. antidumping investigation results in little or no penalties and Asian steelmakers renew their exports to the E.U.