BIR Amsterdam Convention - Stainless Steel & Special Alloys Committee: Under-threat European stainless steel industry “no longer cost-competitive”
Early 2023 had brought an improvement in market conditions for Europe’s stainless steel sector following the low demand suffered in 2022, reported BIR Stainless Steel & Special Alloys Committee Chairman Joost van Kleef of Netherlands-based Oryx Stainless BV in his opening comments to the body’s latest meeting in Amsterdam on May 22.
But as revealed in a subsequent review of the world market by new board member Ritesh Maheshwari of India-based Shabro Metallic Pvt Ltd, the stainless sector in Europe was now suffering renewed price pressure and a sharp slowdown in production, with some mills reportedly operating at only 50% of capacity utilization. Stainless steel demand had also declined in the USA following a drop in consumer spending on durable goods, whereas US stainless scrap exports had surged 120% year on year during the first two months of 2023 to more than 73,000 tonnes on improved demand from India, Taiwan, Mexico and Canada.
In listing some positives, Mr Maheshwari noted that: South Korea’s major stainless mill run by Posco had restarted smelting operations at all furnaces following major flood-related stoppages; the Middle East was enjoying strong consumption growth prospects for stainless steel on the back of project announcements amounting to US$ 2.3 trillion; and superalloy manufacturers were now booking orders as far out as 2025.
Guest speaker Prof. Dr Frank Pothen, Professor of Economics at Ernst-Abbe-Hochschule Jena University of Applies Sciences and Senior Research Associate at the Fraunhofer Center for International Management and Knowledge Economy IMW in Germany, reported on “the substantial ecological benefits from using scrap” in stainless steel production. A Fraunhofer UMSICHT study earlier this year had found that CO2 emissions were reduced by 6.7 tonnes for every tonne of stainless steel scrap used, he pointed out.
As to how the “scrap bonus” of environmental cost savings could be internalized into pricing mechanisms, policy options suggested by Fraunhofer included: integrating mining into the EU emission trading scheme; and integrating raw materials and intermediate products into the Carbon Border Adjustment Mechanism. Having argued that incentives to use scrap were better than mandatory utilization quotas, he also insisted that EU export barriers not only would reduce scrap prices in Europe but also would cut scrap use outside of the EU, thereby undermining climate policy efforts.
Fellow guest speaker Markus Moll, Managing Director of Steel & Metals Market Research in Austria, warned that Europe’s stainless steel industry was “increasingly becoming the ping-pong ball of politics” as the emergence of stricter climate goals coincided with competition from major mills in Asia “who draw from a supply chain that gives them the lowest cost base in the world”. And he added the warning: “Europe is no longer cost-competitive. Without protection, we are losing this industry.”
Mr Moll noted that the rapid growth of nickel pig iron-based stainless steel production had dragged down the overall 18/8 scrap ratio to an estimated 41% in 2022 - “the lowest global total seen in a long time”. He also confirmed his company’s projection of a 2.4% increase in global crude stainless steel production in 2023 to just short of 58 million tonnes. China was expected to see growth of 4.5% whereas European production was thought likely to record a decline of 3% following the almost 12% drop in 2022. “The good news for Europe,” said Mr Moll, “is that there will be less import of stainless steel.”