The second quarter of 2019 was expected to bring reasonable demand. Indeed, Asian stainless mills’ demand for scrap has stabilised. But with Indonesia TS Stainless still producing at full speed, its main destination China has imposed anti-dumping duties on its products. Indonesia TS’s 3 million tonnes of hot coil will be knocking on all doors in all countries, with Taiwan, South Korea and Japan to be hardest hit. The company has opted for an aggressive approach and for very competitive pricing, which will be the biggest attraction for consumers. As a result, several mills in Asia are in a tight corner and are struggling to survive.
Mills in Taiwan and South Korea are continuing the storyline of losing market share to Indonesia’s hot coil. Demand and prices for scrap from the big mills will remain under pressure from the not-so-strong demand of the past. Mills will continue to aim for better discounts on nickel and chrome for the scrap, but with stainless scrap being the cheapest of all forms of nickel units.
Japanese stainless demand is firm owing to projects relating to the 2020 Olympic Games. But with the reduced scrap intake by Posco of South Korea, Japan’s domestic stainless scrap will be enough to meet home consumption needs. Earlier forecasts of huge demand may prove unrealistic.
India has reduced its demand for imported stainless scrap over the past two months as mills are claiming to be obtaining cheaper scrap locally on credit terms; in addition, large volumes of nickel pig iron and ferro-nickel have been used as alternatives to scrap.
Election fever has gripped India, with April and May likely to be slow months as a result. Furthermore, the second quarter traditionally comprises the warmer months when factories slow their production, to be followed by the monsoon season.
Mills have decent order books but margins, if any, are very thin. Banks have also tightened their grip across all industries and are not supporting the mills as they did in the past. Indian banks are also being extra-careful after a few large bank loan scams came to light and even the opening of simple letters of credit is now taking longer than necessary. Such delays are causing major problems for mills which are already under heavy pressure.
Looking to the third quarter, which is normally a slow season for the stainless sector, it is to be hoped that the battery and electric vehicle segments can improve their act and relieve the bottlenecks to growth.
HSKU Raw Material Ltd, Taiwan (CHN) & Mahiar R. Patel, Cronimet (SGP)