Stainless steel scrap prices came under pressure last year amid reports of excess supplies in both the USA and Europe. As a result, the average price of 304 stainless steel scrap in the USA declined nearly 2% over the course of 2019, despite the more than 30% increase in primary nickel prices. Nickel prices reversed course in early 2020, dipping below US$ 12,600 per tonne in late January.
Slowing domestic manufacturing in the USA and diminished overseas demand for US stainless steel scrap made for even more difficult market conditions in 2019. Despite improved demand from India, Taiwan and Malaysia, US stainless steel scrap exports plunged 27% in 2019 to just under 474,000 tonnes, according to US Census Bureau data. Reduced shipments to Canada, China, Mexico, Vietnam and Japan contributed to the downturn last year to what was the lowest annual volume of US stainless steel scrap exports since 2002, compounding the recent challenges faced by US stainless scrap processors and brokers.
After a difficult 2019, there were some glimmers of hope on the trade front for US scrap market participants early in 2020 with the passage of the United States-Mexico-Canada Agreement (USMCA) and the “Phase One” US/China trade deal, as well as China’s announcement of a reclassification of certain scrap grades from “waste” to raw materials. Looking forward, Macquarie is projecting a recovery in the stainless steel market, starting in the second half of 2020, and healthy growth in nickel demand from the electric vehicle battery market. And there have been some positive indicators for US manufacturing: in early February, the Institute for Supply Management reported that the US manufacturing PMI registered 50.9 in January, an increase of 3.1 points from the December reading of 47.8 and marking the first expansionary indicator since July 2019.
