BIR World Mirror Stainless Steel & Special Alloys - Quarterly Report July 2022: A reversal of fortunes for stainless steel and superalloys
A concise summary of the BIR World Mirror on Stainless Steel & Special Alloys – Quarterly Report July 2022. Full version with detailed market reports available in the Members Only section of the BIR website.
Following unusually strong stainless steel demand in the final quarter of 2021, the early warning signs of a correction were clearly visible in the opening months of this year. And market conditions in the USA and particularly Europe have continued to worsen ahead of the summer holidays, not least because of a surge in product flows from Asia.
With Europe’s imports of finished stainless steel products said to have spiralled to record levels, the market is experiencing the perfect storm of low demand at a time of plentiful supply, leading to strong downward pressure on stainless scrap prices. In some cases, it is claimed, scrap prices were effectively halved in the space of just two months.
Over the quieter summer months in Europe, demand for scrap is expected to plummet to one of its lowest levels in more than a decade, according to the latest World Mirror produced by the BIR Stainless Steel & Special Alloys Committee.
The reasons underlying this general decline in market conditions are many and varied, including: the Ukraine conflict; lockdowns in China; huge price increases for oil and gas; rising inflation and ensuing interest rate hikes; and, as mentioned above, increased flows of finished products from Asia and the resulting loss of competitiveness among European operators.
Market conditions in Europe are expected to remain tough throughout the remainder of 2022 and could worsen if power supplies are squeezed further.
US recyclers continue to face commodity market headwinds, with downward pressure on prices for nickel, carbon steel and ferrous scrap for most of July. A surge in Chinese stainless imports has reportedly produced heavy buyer destocking in anticipation of lower prices. The strength of the US dollar has provided a further incentive for imports.
In Asia itself, stainless steel demand tumbled in the second and early third quarters, with mills warning scrap processors and suppliers of disappointing order books. Scrap orders from mills have weakened in Taiwan and South Korea whereas demand seems healthier in China after COVID restrictions were lifted in Shanghai. In India, meanwhile, a 15% export duty has been imposed on finished stainless products, thereby slowing demand for scrap imports.
A year ago, superalloys were being outshone by a robust stainless steel market, resulting in superalloy scrap being used for nickel units in stainless production. But whereas stainless pricing and demand have been waning, superalloy demand is improving on the back of a strong aerospace sector, with some manufacturers reporting their best order bookings since 2011.
While high levels of demand for superalloys are expected to persist throughout the remainder of 2022, this upbeat outlook is not reflected in the pricing of its major commodities, with nickel coming off its March highs to settle below first quarter lows and with cobalt well down on its April peak.
