Desperately Seeking Stainless

 Pricing, demand and supply for stainless steel scrap have largely been traveling down the same rocky road as that of other basic materials during the past 12 months.

In a market report supplied in July to Recycling Today Global Edition, a sister publication of Recycling Today, Dr. Sandro Guiliani of Italy’s Giuliani Metalli SAS remarks, "The Italian stainless steel market was characterized by poor demand on the side of the steelworks and low scrap availability until June."

Two months earlier, Guiliani also had noted that scrap scarcity was a problem.

Markets and the economy they are tied to can turn on a dime, but some recyclers and industry analysts are seeing signs that the worst may be over in terms of low stainless steel production levels, which means mills seeking more scrap will soon be asking brokers and dealers to send what they can.

MELTDOWN

The stainless steel scrap market can only be as healthy as demand for new stainless products churned out by mills.

Statistics for stainless steel production published on the Eurofer.org Web site show output for the EU 27 nations at the following levels:

Annual stainless crude steel production statistics posted by the International Stainless Steel Forum (ISSF), Brussels, encompass a wider geographic area defined as Western Europe/Africa.

But comparing the ISSF’s numbers for that region in the first quarter of 2008 with those for the first quarter of 2009 demonstrates the further, more dramatic decline for this year. In the first quarter of 2008, the ISSF says Western Europe/Africa produced more than 2.4 million metric tons of stainless steel. Exactly one year later, mills in that same region produced just 1.3 million metric tons.

It is little wonder that Guiliani, in a February 2009 report, writes, "We have poor demand from one side of the market, and from the other we still do not have a large quantity of scrap available."

FLICKERS OF HOPE

When scrap recyclers gathered for the BIR (Bureau of International Recycling) World Recycling Conventin in Dubai in May, many of the presentations focused on the woes of the previous nine months.

Anand Gupta of Ambica Steels of India referred to a 40 percent collapse in stainless steel orders in India, causing that country’s scrap imports to slump from a quarterly average of 75,000 metric tons in 2008 to around 50,000 metric tons in the first quarter of 2009.

In Japan, 2009 domestic production of stainless steel was predicted to fall below 2 million metric tons "for the first time in more than 30 years," according to Mark Sellier of KMR Stainless BV, based in Germany. Sellier commented that Asia’s scrap volumes are "down more than 75 percent," in part because of reduced manufacturing activity.

Many recyclers seemed to consider the situation hopeless throughout the summer, but by mid-July and early August, some potentially encouraging signals were picked up from the stainless market.

In mid-July, South Korean steelmaker Posco cast a vote of confidence in the stainless steel industry with two announcements of investment into the sector.

According to a report on www.Bloomberg.com, Posco will buy a 90-percent stake in Asia Stainless Corp. of Vietnam (ASC) and also will build a new stainless mill in India.

Posco plans to build a stainless steel plate mill in western India by 2012 with 450,000 tons of annual capacity.

The company is counting on the consumption of steel plate in India to increase as the country’s automobile production continues to increase between now and 2015.

The purchase of ASC will provide Posco with what it calls Vietnam’s only cold-rolled stainless steel mill. Posco also disclosed plans to expand annual capacity at the ASC mill to 85,000 tons by 2010.

In addition to one steel company’s confidence, steel industry research firm MEPS International Ltd. of Sheffield, United Kingdom, issued a prediction for some resurgence within the stainless industry on the near horizon.

"Rising raw material costs, coupled with improving end-user consumption, should help to lift stainless steel [price] figures during the first half of next year," wrote MEPS in early August regarding the first half of 2010. "Federal stimulus plans [in the United States] are also expected to filter through to higher sales."

MEPS sees the boost as a minor one, not necessarily a launching rocket. "We do not envisage prices moving back to the 2008 levels," the research company says.

ON THE FENCE

For the rest of 2009, MEPS is not as optimistic, predicting, "Sales to end-users are forecast to stay low throughout the remainder of 2009. We predict some price slippage during the fourth quarter of 2009. A possible drop in LME nickel values could also put downward pressure on stainless steel transaction values over this period. Rising molybdenum and chrome costs could offset some of these reductions."

Whether caused by raw material shortages or a temporary uptick in finished product demand, several news reports in early August indicated that stainless mills in different parts of the world would be raising their prices.

A news report from China in August indicates that Taiyuan Iron & Steel Co. has increased its stainless steel price for buyers in its domestic market with European stainless mills expected to do the same.

And in North America, a news item on www.Purchasing.com indicated that two stainless steelmakers had raised their prices slightly while a third company was introducing a surcharge in September.

There is no concensus that stainless steel mils are about to roar back to life en masse, but a few flickers of flame could signify the return of better things to come.

The author is editor in chief of Recycling Today and can be contacted at btaylor@gie.net. This article first ran in the August issue of Recycling Today Global Edition.