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Overall, Asia’s demand for stainless steel continued its downturn into the third quarter of 2022 and the outlook for the final quarter is not looking strong, so we can expect a dull end to the year.

Taiwanese mills’ demand for stainless steel scrap was low at the start of the third quarter although a slight uptick was noted in September because the major Posco stainless melt shop in South Korea halted production owing to typhoon-related flood damage, prompting buyers of stainless products to switch to other mills in the region. 

The effects could be long term as, at the time of writing, Posco still does not know how long it will take to bring the melt shop back online. And as the company is a major stainless scrap user, approximately 25,000 tonnes per month will be trying to find another home. Demand from Posco may not return for two or three months and suppliers will have a hard time finding alternative buyers given that we have entered the final quarter of the year and mills may prefer to be more prudent in their scrap buying.

Stainless scrap demand is healthy in China as it has a price advantage over nickel pig iron for now. 304 grade stainless coils futures in Shanghai have been trading in the range of RMB$ 16,500-17,500 per tonne. There have even been some imports of stainless scrap into China from Europe, something rarely seen in the last two or three years.

Japanese demand for stainless scrap has been at normal levels. But given that around one-fifth of the country’s stainless scrap normally heads to South Korea, the situation at Posco means that either Japanese scrap will need to find a new home or local producers could increase their scrap ratios in order to absorb the additional units available.

In India, a 15% export duty has been imposed on finished stainless products. This has slowed demand for scrap imports as Indian mills were stuck with several orders that they are struggling to fulfil. Some mills are taking the extra loss of 15% to meet their export obligations.

Although petitions have been filed with the government for the removal of this duty, it has still not given a final decision on the matter; until it does, exporters will have no option but to pay the 15% duty on their exports. India has also begun to import slabs on a monthly basis; this is taking a heavy toll on the volumes of scrap that are usually imported. This trend is slowly building among mills around the globe and is basically not good news for scrap exporters.

A large volume of stainless scrap has been sold by Europe to the Indian Subcontinent. Poor demand and higher energy costs in Europe have made its scrap processors keen to explore other markets. As a result, scrap prices are falling and sales are being made at a huge discount to LME nickel - a trend that may continue for the final quarter of 2022. Demand for ferro-nickel has also been weak as a result of these discounts.

Nickel has been falling steadily, causing mills to hold off from buying scrap given their thin order books and the weak outlook.

Meanwhile, the devaluation of the Indian rupee has handed scrap importers a loss on the cargoes they are receiving. Slow conditions can be anticipated for the next month or two in the Indian Subcontinent because of the monsoon season; a few stainless plants are also undergoing annual service and maintenance.

Stainless steel scrap pricing is painting a gloomy outlook for the stainless industry. The saying goes that it is always darkest before the dawn, but unfortunately it seems to be getting darker still.