ISRI2021: A tale of two hemispheres

Two stainless steel and nickel industry analysts who spoke at the ISRI2021 Nickel and Stainless Spotlight session described a stainless steel market with a very different production method in China versus most of the rest of the world. On the horizon, varying nickel, stainless steel and specialty alloys applications may face significantly different prospects if the global electric vehicle (EV) revolution picks up speed.

China makes about half of the world’s stainless steel, but it imports very little of the rest of the world’s stainless scrap because of the production method decided upon by its large-volume producers.

Stainless steel in China is made predominantly by melting nickel pig iron (NPI) made from ores mined most often in Indonesia, Philippines and other nearby nations. Markus Moll of Austria-based Steel & Metals Market Research GmbH (SMR), says “two worlds [are] out there” when it comes to the scrap usage rates of major stainless steelmaking nations.

While China, because of its NPI reliance, uses less than 25 percent scrap as feedstock, in Europe scrap carries from 70 to 75 percent of the metallics load in stainless production. The United States and India, meanwhile, can reach 80 percent scrap rate usages. In the U.S. this is because of electric arc furnace (EAF) technology, and in India it is because of induction furnace methods.

The result for scrap processors and exporters in the United States is that stainless steel scrap has not been exported in the same volumes as aluminum or copper scrap, even before the Chinse government introduced its quotas and restrictions.

In 2020, according to Moll, just “11 percent of stainless steel scrap was consumed on a different continent [from] where it was generated.” Common trading patterns see Russia and some of its neighboring nations supplying scrap to Western Europe, with the U.S. predominantly sending its surplus to nations in Asia, including India, South Korea and Taiwan.

Demand for nickel-bearing scrap has been ramping up in the U.S. as North American Stainless, Ghent, Kentucky, and other producers return to output levels closer to those they enjoyed before the COVID-19-related downturn.

On the scrap export front, it is not clear whether West Coast recyclers in the U.S. may start receiving inquiries from mills in China, since that nation has approved the shipment of three grades of stainless steel scrap for importation in 2021.

Presenter Alina Racu, a Switzerland-based market analyst with Russia-based Nornickel, said EV sales globally rebounded in the second half of 2020, with Europe and China being “the epicenters of growth” while North America exhibited more modest growth.

The global figures demonstrate EV momentum, with 26 percent year-on-year growth in 2020 compared with 2019 and an impressive 78 percent jump in sales in December 2020 compared with December 2019, Racu said.

While the use of nickel in EV batteries bodes well for that commodity’s overall demand, Moll sounded a note of caution on the stainless steel front. “If you look at a car today, it has about 40 kilograms (88 pounds) of stainless steel for a normal passenger car. Out of that, 30 kilograms (66 pounds) is the exhaust system. Other applications are fuel lines and engine valves, the head gasket—all these applications depend on the combustion engine.”

He added, “So, in an e-car, you still have hose clamps and trim, but it’s probably only 20 percent of what you have in a combustion engine car.”

As far as those EV batteries, Racu said forecasting how it will take shape is difficult in part because current volumes of such end-of-life batteries “are very small,” with EV recycling “in its very early stages.”

She showed three different scenarios, however, tied to varying levels of EV sales, the percentage of batteries that are repurposed and the collection rate. In the most aggressive scenario, EV battery makers could reach a point where from 42 to 49 percent of the nickel used in new batteries consists of recycled-content nickel. The other scenarios, however, placed that percentage in a more modest 12 to 21 percent range.

ISRI2021 was organized by the Washington-based Institute of Scrap Recycling Industries.