Global stainless steel, special alloys sector faces mixed outlook amid economic pressures: BIR Q3CY'24 report

The Bureau of International Recycling (BIR) has published its third quarter of calendar year 2024 (Q3CY'24) report, along with a forecast for Q4CY'24, detailing developments in the global stainless steel and special alloy sectors across various regions.

European market

Joost van Kleef, Chairman of the BIR Stainless Steel & Special Alloys Committee and representative of Oryx Stainless B.V. in the Netherlands, highlighted that European demand for stainless finished goods has not met expectations as the fourth quarter begins. Germany's industrial sector continues to disappoint analysts, raising concerns about a potential contraction in Europe's largest economy and the likelihood of a prolonged recession. This scenario emphasises the challenges confronting the region's stainless steel market.

Recently, London Metal Exchange (LME) nickel prices have risen significantly, bolstered by Federal Reserve policies and China's announcement of stimulus packages. However, higher raw material costs could adversely affect stainless steel production, as the market is currently unable to absorb any price increases due to weak demand levels. This situation poses additional challenges for manufacturers navigating the evolving market landscape.

The risk of new finished goods entering the market persists, as demand in China remains below expectations and the inventory of finished products is substantial. Any potential market stimulus is contingent upon a recovery in demand, both in Europe and the Far East. Until then, the market is likely to remain constrained.

Asian market

Vegas Yang from HSKU Raw Material Ltd. (Taiwan) and Mahiar R. Patel from Cronimet (Singapore) highlighted that the summer was lacklustre for nickel, with minimal movement during the Q3CY'24. However, following China's recent stimulus package announcement in late September, LME nickel prices showed signs of improvement.

In Taiwan, stainless steel scrap demand remained stable, although prices were pressured down by competition from nickel pig iron. Hot coil imports averaged 85,000 tonnes per month. South Korea's scrap demand was healthy, thanks to completed furnace maintenance, but faced an influx of hot coils from China, where domestic supply outstripped demand. China's real estate stabilization plan has yet to revive the market.

In China, stainless steel coil prices are currently range-bound. The futures for 304 grade in Shanghai were approximately $13,700/t in July, but they dipped to a low of $13,000 by mid-September.

Japan's demand for stainless scrap for domestic use has remained stable. However, exports of stainless scrap have seen a slight decline compared to previous months, and this trend is expected to continue into the fourth quarter.

Indian market

Ritesh Maheshwari from Shabro International Pte Ltd highlighted that the Indian economy is performing well, showing steady growth with strong government support and ongoing reforms for the industry.

Recent data indicates that stainless steel consumption reached 3.75 million tonnes from April 2023 to March 2024, achieving a compound annual growth rate of 4.36% over the last five years. Additionally, the Indian government has extended the anti-subsidy duty on welded stainless steel pipes and tubes imported from China and Vietnam, which ranges from 12% to 30% and was initially introduced in September 2019.

While mills are optimistic about the long-term outlook, they are wary of short-term challenges, especially from Chinese imports. After a quiet buying period last quarter, there is a rise in inquiries as mills seek to restock. The recent spike in LME nickel futures has led to increased bids from mills, but its uncertain if this buying trend will continue.

Italy market

Ruggero Ricco from Nichel Leghe Spa noted that the current situation in Europe is worse than anticipated, with the continent technically in recession and demand for goods nearly stalled. In this environment of falling prices, companies are hesitant to go ahead with large purchases, opting to buy only what they immediately need. The stainless steel scrap market began to feel the impact of this decline in September, as production resumed post-summer. A notable example is Acerinox, which, after a lengthy labour dispute and a brief recovery in August, announced it did not require as much scrap for October-a trend seen across European mills.

This sharp drop is primarily due to a lack of new orders and increased imports of slabs and nickel pig iron. Scrap prices have decreased, but the volume remains low as sellers are reluctant to accept prices lower than their purchase costs. This pressure on scrap prices has led service centers to demand reductions in coil prices, a trend likely to persist into early next year until market conditions improve.

US market

Doug Kramer from Spectrum Alloys LLC highlighted the rapidly shifting market conditions for U.S. recyclers of stainless steel and specialty alloys. Key concerns include uncertainty surrounding the upcoming election in the country and potential changes in interest rates, which could significantly impact business investment.

While the Federal Reserve's half-point rate cut in September and China's monetary stimulus plans have bolstered market sentiment, the U.S. economy shows a two-speed trajectory. The service sector is experiencing robust growth, while the manufacturing sector continues to struggle, having contracted for five consecutive months as reported by the Institute for Supply Management. Notably, the manufacturing sector lost 24,000 jobs in August, despite the economy adding 142,000 jobs overall.

Additionally, a dockworker strike affecting East Coast and Gulf Coast ports complicated the situation, as these regions export over half of the recycled materials from the U.S. A tentative deal has since been reached.

Overseas, India remains the largest destination for U.S. recycled stainless steel, although shipments decreased by 30% in the first seven months of 2024. Concerns also arise from low-priced materials from China and Indonesia potentially displacing demand for U.S. recycled metals in critical markets.

Middle East market

Omar Al Sharif from Sharif Metals Group DMCC noted that the UAE is experiencing a significant boost in infrastructure and development projects, driven by initiatives like We the UAE 2031 and UAE Vision 2040. These plans aim to diversify the economy and enhance non-oil sectors, leading to increased demand for steel, particularly stainless steel, due to its strength and durability. Major projects, such as the AED 10 billion expansion of the Dubai Exhibition Centre at Expo City, underscore this growing need.

In the Middle East, stainless steel demand is closely linked to nickel prices, which have recently surged due to rising interest in electric vehicle (EV) battery production. As countries invest in EV infrastructure and renewable energy, demand for nickel-intensive batteries is expected to rise, potentially increasing production costs for stainless steel manufacturers. However, the robust demand for stainless steel from large-scale projects may help mitigate some of the cost pressures from escalating nickel prices.

Superalloys market

Rosie Hill from Ireland Alloys Ltd. (GBR) noted nickel prices showed significant volatility in Q3CY'24, averaging between $16,600/t and reaching $18,200/t in October. Initial optimism from the aerospace sector and electric vehicle battery demand supported prices, but rising inventories and a low-grade nickel surplus created downward pressure.

Despite these short-term challenges, long-term forecasts are positive, with demand from electric vehicles and renewable energy projected to shift the market from surplus to deficit by 2028. Geopolitical tensions, particularly in the Middle East, also influenced the market.

The superalloy market remains strong, especially in aerospace, defense, and oil/gas. Demand for INCO 718 and IN625 is robust, though Boeing's production delays have pushed material purchases into 2025. Increased energy prices and new exploration projects are driving higher demand for superalloys in the oil and gas sector.

Shipping costs, especially on China-UK routes, remain high but have stabilised around $7,000/ container. Strikes on the US East Coast have further complicated logistics, impacting costs and delivery times. While Q3 faced continued nickel market volatility and supply chain disruptions, the long-term outlook for nickel and superalloys is optimistic, driven by strong demand from electric vehicles, renewable energy, and aerospace. Price volatility mainly affects the stainless steel sector.