Asia’s stainless sector reached a bottom in terms of pricing and demand in August before rebounding from these lows in September, but it is anyone’s guess as to whether this small recovery is a dead cat bounce or the start of a slow uphill battle. Entering the fourth quarter, the demand picture for stainless steel scrap appears cloudy, with the market likely to remain in a tight range given the combination of low volumes of incoming scrap from manufacturing activities hit by the macro-economic slowdown and of low production levels for stainless steel end products.
In the third quarter, there was healthy demand from Taiwanese mills for stainless steel scrap. Imports of hot coil remained at approximately 70,000 tonnes per month whereas imports of nickel pig iron/ferro-nickel have retreated from 5000 tonnes to nearer 1500 tonnes per month, thus translating into improved stainless scrap uptake by the mills.
South Korea’s stainless steel demand maintained its weak tone throughout the third quarter, with mills taking the opportunity to bring forward furnace maintenance. For the final three months of 2023, conditions are looking healthier than for the previous quarter.
Inside China, housing credit problems are continuing to drag down the economy. Stainless steel prices rebounded and then returned almost to where they had started, with 304 grade coils futures in Shanghai rising from around US$ 14,500 per tonne in July to US$ 16,200 before heading lower again in September to US$ 14,800. Demand for stainless steel products in China could be said to be yo-yoing.
Japan’s weak demand for stainless scrap persisted throughout the third quarter. With domestic mills reducing production, surplus stainless scrap continues to flow into other Asian countries such as South Korea, Taiwan, India and China. Looking to the fourth quarter, however, both stainless mills in Japan are said to be considering melting increases as demand seems to have slowly returned.
The Indian market continues to be very slow-paced in October, with a reduction in overall trade. The Diwali festival of lights is in November and mills will be slow to import materials during that period of many holidays. Sales of finished goods are rather weak and hence mills are not keen to buy much scrap. Semis continue to enter India from Indonesia on a monthly basis and this trend should continue; the month-after-month importation of large quantities of semis this year has impacted demand for scrap imports as well as scrap prices in the domestic market. Imports of NPI and ferro-nickel have also been rather slow, partly because of the downward trend on the LME and the huge nickel discounts being calculated on stainless scrap, thereby reducing demand for these products.
LME nickel is continuing to weaken and mills do not want to get stuck with high-priced inventories of scrap as well as finished goods and so are taking the cautious approach of keeping their positions in the market at a minimum. At the same time, the high cost of capital owing to elevated interest rates has led to less overall business - a trend that could continue until rates head lower. Most Indian mills have posted good results for the first three quarters of 2023 and, in wanting to end the year on a positive note, will avoid taking any unwanted risks.
The hope is that demand will pick up soon and that mills will resume their normal production levels.