Japan: Stainless steel market may see V-shaped recovery on production surge

Due to a plethora of reasons such as the renewed spread of the new corona infection, shortage of semiconductors and auto parts and the disruption in logistics, the shipment volume of stainless steel stood at 600,000 t in the first half and 600,000 t in the second half, Yosuke Sakai, General Manager of Sales Headquarters, Nippon Steel Stainless Steel Corp, divulged at an interview recently.

The average price per tonne was JPY 280,000 ($2,233/t) in the second half of FY'20, but due to the soaring prices of raw materials and various other costs it increased by JPY 30,000/t ($239/t) in the first half of FY'21 and about JPY 60,000/t ($478/t) in the second half of 2021.

How will the market behave in FY'22?

In view of Russia's invasion of Ukraine, the re-expansion of the new corona mutant strain, the rise in global interest rates and the effect of exchange rate fluctuations will significantly worsen, although semiconductor and parts procurement and logistics have normalised creating backorders for the automobile industry.

There is a possibility that a V-shaped recovery will take place, including in the sphere of automobile production. It is necessary to grasp the situation early, make agile decisions and develop measures.

Changes in volumes

Sakai added: "The company-wise export ratio is about 25%, but the export ratio for thin plates other than those for automobiles is less than 10%. So we carefully assess trends in domestic demand. For thick plates, domestic demand for shipbuilding and large-scale overseas energy projects for shipbuilding, we expect that orders for chemical tankers, which are in the off-season, will recover from the latter half of FY'22".

Although the turmoil in the LME nickel market has subsided, prices have remained high, but ferro chrome prices have risen to their highest levels and other raw material and energy costs have also risen.

Cost push that cannot be absorbed by manufacturers will be reflected in prices at an early stage. If the current raw material and exchange levels continue, the average shipping price in the first half of FY'22 will edge up by about JPY 100,000 ($798/t).

"There is no choice but to absorb it with all the participants, and we will continue to talk with the distributors and customers with the consciousness that they are on the same ship," Sakai said.

"We will reduce about 30% mainly for thin plates, but we are proceeding with the understanding of our customers because of the shortened delivery time and the effect of reducing inventory. We are involved in the transfer of mills due to the suspension of all thin plate lines at the Kureura Works at the end of March. The steel grade integration has been completed," he added.

"In the future, the integration will begin in earnest due to the suspension of hot-rolling equipment and the transfer of iron sources at the Nippon Steel Setouchi Steel Works / Kure area at the end of the first half of FY23," Sakai further informed.

NSSC store market

The store market is very important for the company, supplying high-quality products with a wide variety of uses. There are a wide range of resource-saving steel grades, special steel grades and original steel grades, but the company has no intention of surrendering the general-purpose material market to imported materials, Sakai further added.

This article has been published under an exchange agreement between SteelMInt and Japan Metal Daily.