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Stainless Steel / Special Alloys: Suspended purchases? Low production? Weakened prices? A debate on the unclear outlook of the market

  • Wednesday, 10 June 2020
  • Dramatically altered landscape for stainless steel and nickel

    The COVID-19 pandemic had presented the stainless steel scrap industry with “a lot of difficulties and challenges”, reported BIR Stainless Steel & Special Alloys Committee Chairman Joost van Kleef of Oryx Stainless BV in his opening remarks to the body’s eForum on June 10.

    And yet the stainless steel industry had entered 2020 with a measure of optimism following the previous year’s record production of 53.2 million tonnes and a healthy demand outlook for electric vehicle batteries in particular, confirmed Natalie Scott-Gray, Senior Metals Demand Analyst - EMEA & Asia at INTL FCStone Ltd. But as a result of pandemic-related lockdowns, particularly in China, the first quarter had witnessed the lowest three-month stainless steel production figure for three years at 11.5 million tonnes.

    The guest speaker went on to reveal forecasts for the second quarter of a 12% slump in global stainless steel demand to 11.9 million tonnes. Furthermore, the “huge growth area” of electric vehicle batteries had undergone “a very dramatic change”, with global nickel demand from this sector now projected to drop 15% this year.

    With nickel demand from all sources expected to slide 7% in 2020, several years of market deficit were likely to be replaced by a substantial surplus of 130,000 tonnes for the current year. Owing to demand weakness, total nickel stocks at the end of the first quarter of 2020 had been at their highest level since the third quarter of 2018.

    Taking all factors into account, Ms Scott-Gray predicted that the LME nickel price average would be 11% lower than that for 2019 at US$ 12,452 per tonne, but with the potential for the price to fall below US$ 11,000 at some point in 2020; for 2021, she envisaged a 7% increase in the nickel average to US$ 13,318. Fellow guest speaker Jason Schenker, President of US-based Prestige Economics, anticipated a nickel price average of around US$ 13,000 per tonne for 2020, climbing to nearer US$ 15,000 in 2021 and US$ 16,000 in 2022. “We expect higher nickel prices and higher stainless steel prices later this year, next year and the year after,” he stated.

    During a panel discussion moderated by Doug Kramer of Spectrum Alloys LLC in the USA, it was confirmed by Pablo Abasolo, Head of Raw Materials Purchasing at Acciai Speciali Terni in Italy, that he foresaw no prospect of a problem with stainless steel scrap availability in the short term and that prices should remain linked to “weak” stainless steel sales prices. The same contributor also anticipated more difficult market conditions for ferro-chrome than for nickel.

    Mr Schenker warned of a slow sales recovery in key sectors for stainless steel such as jet turbines and automotive, adding that electric vehicle sales were not helped by a low oil price. However, his projections for the longer term were more encouraging: over the next two decades, substantial population growth and increased purchasing power within China and India in particular would boost demand for durable goods - “for which stainless is important”.