As elsewhere, the COVID-19 pandemic is heavily impacting every segment of the US scrap, stainless steel and special alloys markets. From the contracting supply of and demand for stainless steel scrap to falling steel mill production and slumping demand from end-use sectors including transportation, energy and household appliances, markets are struggling across the board.
The effects of the Coronavirus crisis have come on top of a difficult start to 2020, with nickel and stainless steel prices already under pressure and with stainless steel production continuing its migration away from the West and towards Asia.
According to the latest figures from the International Stainless Steel Forum, melt shop production in the USA fell 7.6% last year to 2.593 million tonnes. More recently, the US steel mill capacity utilization rate has declined to around 56-57%, down from over 80% this time last year. But the flow of material into scrap yards is also declining sharply as raw material prices have dropped and a number of yards have shut their retail operations owing to health and safety concerns, resulting in recyclers running their equipment well below normal capacity.
On the corporate front, Moody’s downgraded Outokumpu’s corporate family rating from B2 to B3 in late March. The credit rating agency foresees a significant drop in stainless steel deliveries by Outokumpu (which owns the Calvert stainless steel mill in Alabama) over the next few quarters, “pressuring earnings and free cash flow generation, which will likely turn negative this year in Moody’s view”.
For stainless steel market participants, there have been relatively few sources of support although, in a positive development, stainless steel has been deemed an essential industry in the USA. In addition, healthcare systems rely on stainless steel for numerous applications including ventilators, oxygen tanks and hospital beds. However, as with practically all industries today, the depth and duration of the current economic contraction stemming from the COVID-19 pandemic remain the key uncertainties for US scrap processors and stainless steel producers going forward.
