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Asia

Asia’s stainless sector ended the first quarter of 2023 with weak overall demand for its end products. With a fading impact on demand expectations from China’s reopening, mills around Asia needed to reduce their intake of stainless scrap owing to weak sentiment among coil centres and consumers.

Taiwanese mills’ demand for stainless steel scrap gradually decreased towards the end of the first quarter while scrap orders in April and May were approximately 30% below normal levels owing to increased volumes of Indonesian hot coil and nickel pig iron imports. This was on top of weakening stainless steel product demand in Asia as a result of overall macro-economic conditions.

South Korea’s major stainless mill run by Posco has restarted smelting operations at all furnaces and re-entered the international market in the first and second quarters, albeit with below-average tonnages. Overall, however, this is a positive development as Posco is a major stainless scrap smelter and its demand should improve in the coming months.

Despite the influx of stainless scrap and nickel pig iron accumulated by mills in China, expectations of an uptick in the country’s stainless demand did not materialize, with stainless flat and long product prices nosediving during March and April; 304 grade stainless coils futures in Shanghai fell from RMB$ 17,000 to RMB$ 15,000 per tonne. The last two or three months have seen some small quantities of stainless scrap imported into China at prices higher than those offered by Indian mills, but demand from Chinese mills has declined substantially since mid-April.

Japanese demand for stainless scrap has remained weak, with an oversupply in the domestic market and with scrap flowing into other Asian countries such as South Korea, Taiwan and China.

In India, the situation is not as bright as anticipated: stainless scrap demand is very poor and mill buying prices are weak. Scrap demand has been greatly affected by the volume of semis imported into India. The two largest stainless mills in India, which together account for over 50% of domestic production, have been slow in their scrap imports for the last three or four months, thereby leading to an overall drop in demand for imported scrap. In addition, the large volumes of locally-generated scrap in India have been substituting for imports.

Mills have weak order books and, owing to an uncertain global business environment, are not taking any risks with their market positions. Furthermore, higher interest rates over the last year have been a cause for concern as risk factors increase and margins become squeezed. The banks are also very cautious as they have to ensure the security of funds loaned out to mills.

The period from the end of May until July is usually slow in India as the monsoon season sets in and some mills undertake annual maintenance.

The last one to two years have brought some changes for the Indian stainless industry, notably the import of hot rolled coils and slabs, as well as a major increase in imports of Zurik which is ultimately sold into stainless mills to substitute for imported scrap. Both these factors have eaten into overall stainless scrap import volumes. As markets are volatile and predicting nickel prices is difficult, there has been a change to the established trend of mills keeping large tonnages of surplus scrap in stock; if there is an urgent requirement for scrap, there is significant local availability usually on credit terms, thereby making it more attractive than imported scrap.

The third quarter may bring some improvement in scrap demand but, until then, it is a watch-and-wait situation.