What were global stainless steel market trends in Q2CY'24? How will Q3 look like? BIR report

The Bureau of International Recycling (BIR) released its report for the July 2024 quarter, detailing significant challenges and transformations in the global stainless steel industry. In Europe, manufacturers are facing profitability pressures amid rising raw material costs and environmental regulations. Asia is navigating a volatile London Metal Exchange (LME) nickel prices and shifting demand dynamics, while insights from Japan and India highlight post-election market conditions and logistical challenges.

Europe

Joost van Kleef, Chairman, BIR Stainless Steel & Special Alloys Committee and Oryx Stainless B.V. (NLD), highlighted the ongoing challenges in Europe's stainless steel sector as it navigates through a period of reduced production and heightened raw material costs.

Europe's stainless steel sector is currently in the summer season, which is typically quieter with reduced production and lower raw material demand.

In 2024, the industry saw a prolonged strike at one of its major flats producers and a rise in stainless scrap prices, contrasting with cheaper nickel pig iron from Asia.

European mills are intensifying efforts to cut greenhouse gas emissions through environmental strategies, increasing demand for stainless scrap as a sustainable alternative. Despite these initiatives, profitability challenges persist for leading flats producers.

Summer is expected to lower stainless scrap demand and reduce liquid steel output.

Looking ahead, European stainless steel production is expected to align with stagnant or potentially declining economic conditions through the year's end.

Asia

Vegas Yang from HSKU Raw Material Ltd, Taiwan (CHN), and Mahiar R. Patel from Cronimet (SGP) shared insights into the Asian stainless steel landscape.

Since May, LME nickel futures surged above $21,000/t, paralleling copper's trend, but softened to $16,800/t in July amid a summer lull and surplus forecasts by the International Nickel Study Group (INSG).

In Q2, 2024, Taiwanese mills faced sluggish demand for stainless scrap, while hot rolled coil imports rose from 75,000 t to 85,000 t over April to June. Taiwanese stainless steel end-product demand is slowly recovering, with expectations of a stronger Q4 performance.

South Korea saw minimal stainless scrap demand due to Q2 furnace maintenance, but operations resumed in June, likely boosting Q3 scrap demand. Stainless mills held robust finished goods order books.

China continues its real estate stabilization efforts, with stainless coil prices in Shanghai ranging from $13,700/t in mid-June to $14,200/t in July, amidst expectations of market stabilization by late 2024 or early 2025.

Japan reported increased domestic stainless scrap consumption in Q2, with subdued exports due to high freight rates and limited vessel space likely continuing into Q3.

Logistical challenges persist due to the Red Sea crisis, which is diverting vessels and elevating shipping costs, particularly impacting Asian ports.

July and August, marked by the monsoon season and European holidays, will slow down production and mills may opt for maintenance activities. These factors will hamper Asia's finished stainless goods sales. Demand recovery is expected in late 2024, especially in Q4.

India

Ritesh Maheshwari from Shabro International Pte Ltd in India said that although a new government is in place and decision-making has commenced, there has not been a notable upturn in demand or pricing for finished products.

Following recent elections, India's stainless steel market has remained sluggish compared to Europe's premium-priced deliveries. Domestic stainless mills faced challenges amid weak order books and expected interest rate cuts that did not materialize, and which have been squeezing profit margins.

A recent report forecasts India's steel demand to grow annually by 5% to 7.3% over the next decade, reaching 220-275 million tonnes per annum (mntpa) by FY'34. This growth will be driven by government infrastructure initiatives, notably the development of 11 industrial corridors comprising 32 projects under the Prime Minister Gati Shakti scheme, and which is expected to significantly boost steel consumption.

Indian mills have adopted a cautious approach, refraining from aggressive procurement of imported stainless scrap amid stable domestic availability. Scrap inventories at mills are moderate, influenced by continuous pressure on finished product prices. Their strategy emphasizes local sourcing of scrap, selective imports at viable prices, and stringent inventory management to avoid overstocking.

A notable recent development is the substantial surge in global container freight rates, particularly impacting Far East-India routes, with significant increases also observed from Europe and the US. Imports and exports into India, especially of stainless scrap typically imported in containers, have been significantly affected. The market anticipates a reduction in ocean freight costs and potential movement in finished product prices to restore momentum.

Furthermore, increased imports of nickel pig iron and ferro-nickel into India have impacted the previously bullish stainless scrap trade. Imports of semis such as slabs and blooms from Indonesia have further diminished India's reliance on imported scrap.

Italy

Ruggero Ricco Nichel Leghe Spa (ITA) said, entering Q3CY'24, conditions deteriorated significantly from the previous six months. A sharp drop in nickel prices increased scrap availability, driven by speculation on price rises. Yet, this surplus did not boost sales in July. Earlier in the year, scrap prices had risen due to scarcity from reduced industrial output in Europe and speculative trading.

Meanwhile, sales of finished products continued due to the absence of a major market player amid labour disputes. Manufacturers of long products faced low order volumes, leading to cautious scrap procurement. Imports of coils from the Far East increased.

To address challenges, flat manufacturers imported non-EU scrap, slabs, and nickel pig iron, alongside declining nickel prices, which cooled scrap prices in July.

Middle East

Omar Al Sharif from Sharif Metals Group DMCC (ARE) highlighted a cautiously optimistic outlook for the Middle East stainless steel market amidst regional geopolitical dynamics.

Entering Q3, the market remains volatile amid cautious optimism against the backdrop of ongoing political tensions. Global stainless steel production is set to grow over 4% this year, exceeding 60 mnt, with the Middle East and Africa expecting a 4% annual growth rate from 2024 to 2032. Technological advancements and sustainability efforts continue to drive stainless steel's role in construction and infrastructure projects, notably in the UAE, where demand for structural steel is rising sharply to meet urbanization demands.

Super-alloys and aerospace sector

Rosie Hill of Ireland Alloys Ltd. (GBR) provided insights into the superalloys market, noting resilience in demand driven by aerospace sector recovery and increased defense spending.

Q2CY'24 witnessed significant volatility in the nickel market, driven by geopolitical tensions and supply chain disruptions. Prices surged to $19,775/t in April due to production increases and optimism, peaking again at $19,763/t in May amid Indonesian closures and unrest in New Caledonia.By June, prices fell to $17,190/t due to global oversupply concerns. Despite short-term challenges, a projected 100,000 t global surplus and subdued prices are expected into 2025.

Long-term optimism stems from rising demand in electric vehicles and renewables. Meanwhile, transportation disruptions and strong demand for super-alloy scrap highlight sector resilience amidst broader market complexities.