The European economy has been showing some weakness of late in terms of growth rates; in its biggest economy, Germany, the leading PMIs are reporting a continued decline. Domestic demand seems to be robust but exports by the machinery, chemical and car industries in particular are still underperforming. The main reason is slower growth in China owing to its continuing trade conflict with the USA.
However, growth in China’s stainless crude output has exceeded expectations, most of this coming from Tsingshan China. Lately, the company seems to have switched production from Indonesia to China.
The European market for stainless finished goods is constantly confronted with cheap imports originating mainly from Indonesia. This is leading to unrelenting cost pressure, lower order intakes and thus lower capacity utilisation rates. As a consequence, one of the major EU stainless producers has announced job cuts of more than 10% at its main facility.
Regarding the stainless scrap market, lower demand and pressure on stainless mills’ profitability - caused by high imports of finished goods at low prices - have led to significant pressure to cut costs for related raw materials. In contrast, there has been a surprisingly sharp gain in the nickel price over recent weeks.
The market remains challenging. Many market participants are expecting some correction soon in the nickel price, which would have its usual effect on the availability of stainless scrap.