BIR Stainless Steel World Mirror May 2013

Global – The following article is based on the latest Stainless Steel & Special Alloys World Mirror produced by the BIR world recycling organisation for the benefit of its members.

The lack of demand for stainless steel scrap has been balanced by its low availability, while a weak nickel price is also expected to be among the major challenges for scrap processors and traders in 2013. However, it is believed that nickel pig iron (NPI) production in China will not only provide a ceiling for nickel prices but also support the metal’s value ‘when it drops too low’.

For stainless production, China still relies mainly on NPI for its nickel units. But with the LME at lower levels, some producers ‘may cut back less cost-effective NPI production’. Experts believe it is ‘unlikely that China will return to the stainless scrap import market in the near future’.

Scrap supply in Asia is tight given lower manufacturing levels. Stainless steel mills in South Korea are anticipating that production for the whole of this year will be approximately 400 000 tonnes or 20% lower, with most of the impact falling on the 300 series.

Meanwhile, the country’s imported scrap inventory is deemed ‘quite high’. From the perspective of recent history, the country’s scrap ratio is still ‘relatively robust’ at 50-55%. The third-quarter outlook is ‘flat at best’, with the greater likelihood of ‘further production cuts and less demand for scrap’.

In the first quarter of 2013, most mills in Taiwan purchased scrap ‘aggressively’ in expectation of increased activity in the second and third quarters. Such hopes have not materialised to date and now appear unlikely to be met. Therefore, the prediction here too is that all mills in Taiwan will trim production and reduce scrap purchases to an even greater extent.

Plummeting imports

As a result of very weak demand from stainless steel mills in India, scrap imports have plummeted. With the steep fall in nickel prices, scrap processors are reluctant to sell what they have collected at higher nickel values. India’s stainless steel mills are facing a major slowdown and perhaps ‘one of their most difficult periods in recent years’, with very few enquiries received for finished products.

Mills are currently operating at close to 60% of their capacity and, given the current economic situation, a very depressed 2013 appears inevitable.

In Europe, there is said to be continuing uncertainty surrounding the ongoing reorganisation of the stainless industry which, according to one expert, is ‘suffering probably its most difficult conditions for decades’. Issues include overcapacity, product mix uncertainty and sales disciplines.

Also, a falling nickel price has increased the pressure on stainless mills; customers have been cautiously following these price developments and actively postponing orders. In common with counterparts in Asia, weaker-than-forecast demand for finished products during the first quarter forced some mills to reduce production levels and thus stainless steel scrap requirements.

Relatively buoyant

The market in the USA appears relatively buoyant compared to most other producing regions. In the first quarter of 2013, stainless mills increased their production by approximately 5% over the same period last year. April mill scrap purchasing continued to support the relatively decent business climate for US mills, as stainless production reportedly increased 4.5% over March.

The vast majority of this production gain is being attributed to North American Stainless (NAS) which is said to have run at 80-85% of capacity. The ability to secure their scrap requirements at discounted levels appears to be enabling US producers to remain competitive with their sales. Meanwhile, scrap availability is tight in the USA owing to the decline in manufacturing and major demolition activity.

Most analysts expect US stainless mills to record a 6% increase in production for this year and so the requirement for scrap should persist. Interestingly, US production of the austenitic grades has risen by around 3% over the past five years.

Russia has controlled exports of stainless scrap to the extent that ‘it is barely possible to earn money’ from this activity; scrap can be exported successfully only as semi-finished product in slab/ingot form, flowing mostly through the port of St Petersburg. Scrap sales to domestic consumers regularly raise issues such as payment delays and price renegotiations after delivery.

Bleak forecasts

The titanium and specialty alloy markets are characterised by bleak forecasts and plenty of material availability. For the titanium sector, aerospace demand predictions have been lowered considerably while secondary titanium demand has also stagnated owing to lower production rates for ferritic stainless and carbon steel along with increased scrap availability.

The nickel and cobalt based alloy sector is ‘in the doldrums’ while the high speed steel market has also retreated, and projections for the second and third quarters are not positive.