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Asia

In what is the hottest summer in recent history, Asia’s stainless sector ended the second quarter with lacklustre demand. Going into quarter three, demand for stainless steel scrap seems weak; scrap volumes from manufacturing activities have slowed and only post-consumer scrap is flowing freely.

In the second quarter, Taiwanese mills’ demand for stainless scrap was at a low level. Approximately 70,000 tonnes per month of Indonesian hot coil and 5000 tonnes per month of nickel pig iron are flooding into Taiwan, with one positive being that Taiwanese mills are now using up to 80% scrap in their melts.

South Korea’s stainless steel demand is also weak in line with global macroeconomics and mills have been bringing forward furnace maintenance early in the third quarter to ride out the rough patch. 

Inside China, the slow downward pricing fall-out from the housing sector is causing a lot of pain in consumers’ pockets and to the overall economy. Mills that are listed are seeing low single-digit percentage profits, with some operators even making a narrow loss. The markets for all types of stainless raw materials and scrap are reported to be weak. 304 grade stainless coils futures in Shanghai are trading within a narrow range of RMB$ 14,500 to 15,500 per tonne. 

Japan’s weak demand for stainless scrap has persisted too. With domestic mills reducing production, surplus stainless scrap is continuing to flow to other Asian countries such as South Korea, Taiwan, India and China.

India’s stainless steel scrap imports have been relatively slow over the last couple of months, mainly owing to mills’ poor order books and thin trading margins as a result of several factors such as higher interest rates. There is also a trend towards semis such as stainless slabs arriving in India from Indonesia on a monthly basis, thereby reducing demand for imported scrap. This trend is not new and has been rampant in countries like South Korea and Taiwan where stainless scrap requirements have fallen significantly over the last two years. This trend is now gathering pace in India.

Overall market sentiment is weak and stainless mills have not been functioning at full capacity for several months, with the business becoming very competitive. There is financial tightness being felt in the Indian market owing to the increased interest rates. Imports of substitute materials such as ferro-nickel and nickel pig iron have also been slow as stainless scrap is available at huge discounts to the LME, making these substitutes less interesting.

The next two months could well remain slow as European mills implement production cuts in line with the summer holiday period and the Indian monsoon season slows trade.

Expansion of production capacities by several Indian mills is a very positive step for the country’s stainless steel manufacturing industry. Some mills are well-placed to take advantage of a good domestic demand for finished stainless steel products which is mainly due to the boom in infrastructure projects such as railway and airport construction. A healthy majority of finished stainless steel products are still exported but increased capital/interest costs are making business competitive and difficult.

There is much uncertainty all around as a number of companies and economies are under pressure, with some people feeling that a global slowdown may be on the horizon.