Quarterly Report – February 2020

Stainless steel scrap demand has made some sort of recovery after a terrible fourth quarter in 2019.

Most Far East mills are buying stainless scrap at huge nickel discounts and have substantially reduced their purchased volumes. Most scrap merchants - especially the large processors - have been forced to accept the reduction in nickel percentages owing to the weak demand from mills. Furthermore, there seems to be an overproduction of flat products, thus prompting mills to slow their production.

Looking back, 2019 was a rollercoaster ride for the nickel and stainless market, with two full cycles of swings within a year which finally ended at a general low, namely low demand for scrap, low demand for stainless finished products and a low in the nickel price. Nickel fell from a peak of US$ 18,800 per tonne down to around US$ 12,500; the metal’s rise in the third quarter, based on Indonesia banning nickel ore exports and electric vehicle growth, fully evaporated in the fourth quarter, with the market waking up to the ongoing situation of an overproduction of stainless products.

In last year’s fourth quarter, Taiwanese and South Korean mills’ demand for scrap was really weak as they tried to use the rise in nickel to deplete their own raw materials and stocks. Into the opening quarter of 2020, mills in Asia have generally worked down their inventories but the harsh discount applied to stainless scrap is leading to slow incoming scrap flows. Owing to stronger local prices both in Europe and the USA, large volumes of scrap have not moved to the Far East. Several scrap merchants have not sold large quantities in the first quarter but rather on a month-by-month basis, adopting a cautious approach as the supply of scrap has been relatively tight and buying prices have also been unattractive.

In China, on the other hand, stainless scrap demand is generally healthy as Indonesia’s nickel ore export ban is forcing some mills to take a more serious look at the stainless scrap option to make up for the nickel units that will be lost over time.  

Japan’s stainless demand is slowly returning to normal levels, and its domestic scrap will be just enough for home consumption.

Thus far in 2020, India’s stainless steel scrap buying has also been very weak owing to several geopolitical factors and nickel uncertainties forcing mills to slow down. The credit crunch is being felt across the Indian sub-continent and general business sentiment has weakened. People feel the demand for stainless steel scrap should improve later in the year as local stocks have become low. There has also been a steady rise in imports of ferro-nickel into India, which has affected some scrap buying.

While progress towards resolving the US/China trade war should be good for business and for stainless overall, the coronavirus outbreak has had a negative effect on world trade. At present, the most immediate effects are being felt in Asia but there could be a more global impact in the coming weeks and months if the epidemic continues to worsen.  

Vegas Yang - Vegas Yang (Asia)

Vegas Yang

HSKU Raw Material Ltd, Taiwan (CHN) & Mahiar R. Patel, Cronimet (SGP)


Country
Asia
Issue
Quarterly Report – February 2020