Overseas demand benefits stainless scrap market

Producing new stainless steel from scrap should be the favored environmental option, but abundant and cheap nickel pig iron remains the raw material of choice in Asia, said a guest speaker at the Stainless Steel & Special Alloys Committee meeting at the Brussels-based Bureau of International Recycling (BIR) 2019 World Recycling Convention & Exhibition in May in Singapore.

Robert Messmer, a nickel and stainless steel industry analyst with Austria-based Steel & Metals Market Research (SMR), said this decade and the one prior, production in Asia has grown to dominate the market, with mills in China alone accounting for more than 50 percent of stainless steel output in 2018.

SMR’s forecast for 2019 sees global stainless output growing by 2.7 percent, with net gainers likely to be Indonesia, where output could grow by as much as 30 percent; followed by the U.S. with 5.7 percent growth; and China with 3.6 percent growth. Taiwan’s output is expected to drop by 20 percent in 2019, while output could shrink between 1.6 and 3.3 percent in Europe, Japan and South Korea.

“Despite new investments in secondary aluminum production capacity, the rest of the world ‘doesn’t have critical mass in secondary [production] to replace China.’” – Henry Van, CRU International Ltd.

In terms of feedstock for this production, stainless steel scrap is “the lowest cost option” for mills, Messmer said, adding that it is experiencing “very competitive pricing at the moment.” However, negative factors are putting a ceiling on scrap demand. Impurities in stainless scrap mean that “especially in blends, there can be quality issues” for mills, he said.

In Asia, the abundance of nickel ore and nickel pig iron means most newer mills there have been designed “for a low scrap input,” Messmer said.

Market reports from Stainless Steel & Special Alloys Committee members, read by Vegas Yang of Taiwan-based HSKU Raw Material Ltd., indicated relatively strong stainless scrap flows in Europe in the first quarter of 2019, while scrap processors in the U.S. benefited from “overseas demand for stainless scrap.”

While aluminum scrap is flowing at record volumes from North America and Europe to India and Southeast Asia, the new demand has not been enough “to fill the hole China is leaving behind,” a speaker at the BIR Nonferrous Division meeting said.

Henry Van, a Singapore-based aluminum industry analyst with CRU International Ltd., said the action by China’s government to restrict scrap imports has created a “supply-side shock” in the U.S. aluminum scrap market. China’s aluminum scrap import volumes in February 2019 “were the lowest in more than a decade,” he said.

Some of that scrap is still finding its way to China after being shipped to Malaysia, Thailand, Taiwan and other nations near China, where it is melted and cast at facilities in those countries. Another beneficiary of the new supply glut is India, where investments in secondary production are being made by global firms including India-based Hindalco and Japan-based Daiki.

Even with such investments, the rest of the world “doesn’t have critical mass in secondary [production] to replace China,” Van said. The result has been “historically cheap” aluminum scrap prices in the U.S.

Van said aluminum scrap is nonetheless poised for a bright future. He said CRU forecasts global aluminum scrap demand will grow in absolute volume and in market share.