An ‘unhealthy’ stainless recycling market

Global – In general, conditions within the stainless recycling industry are not healthy, with almost all the leading processors confronted by significant pressure on margins, according to Joost Van Kleef, chairman of the BIR’€™s stainless steel & special alloys committee. Penetration of final product into the EU market ‘€˜remains significant’€™ although ‘€˜shifts in origin are clearly visible’€™, he adds.

Over the last couple of months, LME nickel has been ranging from around US$ 9650 to US$ 10 800 per tonne, with gains attributed mainly to the proposed nickel mine closures in the Philippines – which accounts for around a quarter of globally-mined nickel – and to a projected nickel deficit of up to 100 000 tonnes for this year.

The world’s runaway leader in terms of stainless steel output, China has increased its production by as much as 7% thus far in 2016 and could well reach a total of 23 million tonnes for the year as a whole. At the same time, rising raw material costs in China have pushed stainless steel prices higher.

Even though supply of scrap has tightened substantially across Asia, mills ‘are desperately trying to reduce scrap prices relative to LME nickel’, thereby continuing to ‘squeeze merchant margins throughout the region’. India is still paying more for stainless scrap than the Far East but the robustness of its demand owes much to the fact that local supplies are available on credit terms and ‘many of the second- and third-tier mills prefer this to imported scrap’. Its limited availability, however, means large mills ‘still depend on imports’.

Figures suggest India doubled its stainless steel imports from China in the 2015/16 fiscal year. To protect its domestic stainless sector, the Indian government is threatening to increase the Basic Customs Duty from 7.5% at present to 12.5%.

Staying on the theme of duties, the government in Russia confounded the expectations of its stainless steel scrap industry by not following the established pattern of lowering export duties in September in line with the World Trade Organization agreement. Scrap has been put on a special list of goods of strategic importance to the Russian economy.

‘For a scrap processer or a mill producer, this remains a difficult business,’ is the lament from the USA. Expectations of an increase in product demand in the fourth quarter have not materialised thus far and mill order books are now considered to be ‘just okay at best’, with production outages forecast during the quarter.

Thus, consumers can comfortably secure their monthly stainless scrap requirements. Availability of scrap from industrial and demolition sources is described as ‘weak’ in Italy. Domestic steelworks’ demand is said to be sufficient to absorb availability ‘without pursuing an aggressive purchasing policy’.

Over in the UK, meanwhile, scrap sourcing ‘has resumed its challenging norm’ as availability has slowed – partly because LME nickel volatility has dissuaded scrap dealers from releasing inventory.

Low prices have dented the market in the Middle East, to the extent that most scrap yard owners and dealers are said to be eyeing diversification into other business areas while stockpiling large volumes of material in the hope that the market will pick up at some indeterminate point in the future.

‘The 304, 316 and 410 grades of stainless steel are attracting very low demand, with most interest being shown in chrome steel and low-nickel items,’ it is confirmed. As regards general conditions for superalloys, there has been an improvement in special alloy demand for the aerospace alloy sector.

Demand from steelworks for stainless and high nickel grades has continued to be ‘rather good’ but steelworks ‘are pushing down prices for scrap’, it is maintained.

This article is based on the latest World Mirror on Stainless Steel & Special Alloys, provided by BIR for the benefit of its members.