The stainless steel industry had entered 2020 in reasonably confident mood following the previous year’s record production of 53.2 million tonnes and a relatively healthy demand outlook. That was the recollection of guest speaker Natalie Scott-Gray of INTL FCStone Ltd at our BIR Stainless Steel & Special Alloys Committee eForum in June last year.
By then, of course, she and the rest of the world knew that 2020 was going to be unlike any other year we had ever experienced, with the COVID pandemic creating many difficulties and challenges for the stainless sector. As fellow guest speaker Jason Schenker of Prestige Economics pointed out, many key consumers of stainless steel – such as aerospace – were unlikely to see a rapid rebound in sales while even the meteoric rise of electric vehicles would not be helped by a low oil price.
Challenges for the scrap sector were not in short supply in pandemic-hit 2020. Just some of these were listed by my fellow board member Doug Kramer at our webinar in October last year: difficulties with transportation and inventory management; finding sufficient qualified workers; volatile commodity pricing; worsening credit insurance availability; squeezed cash flows; and reduced capital spending.
Other factors making 2020 a difficult time for our sector included India’s general push towards reducing its reliance on imports, including stainless scrap of which it has long been a major international market player. Leading producer Jindal Stainless announced, for example, that it had already cut the imported share of its raw material needs from 65% in 2017 to around 45% and was expecting to trim this figure to 35% during the course of 2021.
Further to the detriment of scrap, there was evidence last year – notably in parts of Asia – of cheap stainless slab being imported from Indonesia rather than being produced domestically. In other words, product made from stainless scrap was being replaced by one entailing perhaps five times more carbon dioxide emissions. This would seem to be a clear contradiction in these times when politicians are striving for “greener” industrial growth.
Stainless steel has one of the smallest environmental footprints of all engineering materials, not least because it can be recycled endlessly and without any loss of quality. A study conducted by the Fraunhofer Center for Economics of Materials on behalf of German steel scrap association BDSV concluded that climate and environmental costs avoided by adopting the scrap route to stainless steel production could be as high as Euro 502 per tonne. What excellent reasons for promoting the greatest possible use of scrap.
According to the International Stainless Steel Forum, stainless and heat-resisting steel melt shop production was hit hard by the pandemic in 2020. Output worldwide tumbled to little more than 11.5 million tonnes in last year’s second quarter – and yet China’s production was already recovering by that stage.
Indeed, it was predicted at our webinar in October that the combined share of global stainless steel production held by China and Indonesia was already around 68% and would climb to more than 70% in 2021. In what was a welcome dose of normality in an otherwise abnormal year, this forecast came from a regular contributor to our Conventions, namely Markus Moll of SMR GmbH – Steel and Metals Market Research. He also anticipated that this China/Indonesia share would begin to plateau in the years to come.
Perhaps more encouragingly, Mr Moll told us that the global decline in stainless steel consumption was on course to be limited to just 4% in 2020 – thanks in large part to growth of around 3% in China – and that this would be more than offset by an 11% surge in 2021. We know that 2021 will be another difficult year for the many reasons outlined above, but at least there are also more positives from which we should draw encouragement.
Stainless steel is an iron alloy that contains nickel and chromium to protect it against corrosion and rust. This material is remarkably strong and resistant to high temperatures, providing optimum performance under severe environmental and chemical conditions. Stainless steel’s inherent physical properties make it ideal for use in the construction, automotive and transportation sectors. Its versatility also makes it a popular material in household items such as kitchen appliances and cutlery.
Demand growth for stainless steel has outstripped that of most other metals over the last few decades. At a recent BIR Convention, it was noted that the compound annual growth rate (CAGR) for stainless steel was 5.6% for the period from 2000 to 2018, with China recording a particularly strong CAGR of more than 14% over that same period. There was an increase of 4.8% in global crude stainless steel production to 52.43 million tonnes in 2018, with output becoming ever more dominated by Asia with its world production share of around 80%.
Besides nickel and chromium, other major alloying elements used in combination with steel include molybdenum, titanium, tungsten and vanadium. These metals are scarce and only available in very few parts of the world, which makes extraction costly and difficult. Recycling is therefore essential to minimizing depletion of the planet’s natural resources; as a result, the recycling industry has become a vital player in providing a stable supply of quality secondary raw material.
APPLICATIONS & RECYCLING FACTS
Stainless steel is 100% recyclable and loses none of its original physical properties in the process. The most common applications include: