Quarterly Report – July 2019

Following the previous report in April, the market was soft for two months and then nickel roared back in July, leaping from some US$ 12,000 per tonne to approximately US$ 14,750 in around two weeks.

Asian mills’ demand for stainless scrap has stabilised but Indonesia TS Stainless is still producing at full speed. Its main destination China has imposed anti-dumping duties on its products. The business will be promoting its 3 million tonnes of annual hot coil production in many countries, backed by competitive pricing.  

Meanwhile, it has been reported that TS’s plant in India is on target to start rolling hot coil to cold coil in the second half of 2019. It will be interesting to see whether this impacts India’s current position as repeatedly the top destination for stainless steel scrap.

In the third quarter of 2019, demand and prices for scrap from the large mills in Taiwan and South Korea will remain under pressure, although demand does appear to have stabilised. Mills are continuing to aim for better discounts on nickel and chrome for the scrap, however, with stainless scrap representing the cheapest of all forms of nickel units.

Japan’s stainless demand has turned quickly south with orders relating to the 2020 Olympic Games now ended. Coupled with the reduced scrap intake by South Korea’s major mills, domestic stainless scrap in Japan will be sufficient to meet home consumption.

India has also reduced its demand for imported stainless scrap over the past two months as mills are claiming to have obtained cheaper scrap locally on credit terms; furthermore, large volumes of nickel pig iron and ferro-nickel have been used as an alternative to scrap. Another key issue has been the difficulty in selling their finished products as their order books are weak.

The US/China trade war has caused confusion in the markets and led to a loss of direction. There has also been a huge currency devaluation factor which has taken the industry by surprise. This is a major problem for which the mills have no other solution than to hold off from purchasing imported scrap. The Indian banks are also being extra-careful after several big bank loan scams came to light, such that even the opening of simple letters of credit is taking longer than necessary. Ultimately, very few scrap suppliers are able to secure a proper letter of credit, and have been stuck with shipping first and then receiving their letters of credit once the cargo was already on the water. Delays in opening letters of credit are causing major problems as everyone is already under a lot of pressure.

The third quarter is normally a slow period for the stainless sector. However, the nickel price increase may offer evidence that the battery and electric vehicle (EV) sectors are actually getting their acts together and freeing up the production line bottleneck. With Tesla selling more cars than ever before in the second quarter of 2019, Europe’s car makers are marketing more EV than combustion engines.