Quarterly Report – September 2020

The US stainless steel market appears to be improving, although from very low levels. Steel mill capacity utilization rates have recently increased to more than 65% from around 55% in late April/early May but are still well below what would be considered “healthy” at above 80%. 

This summary coincides with reports of generally improving manufacturing conditions. The Institute for Supply Management’s manufacturing PMI reading in August registered 56.0, up 1.8 from July’s 54.2. “After the Coronavirus brought manufacturing activity to historic lows, the sector continued its recovery in August, the first full month of operations after supply chains restarted and adjustments were made for employees to return to work,” the organization stated.

Stainless steel and scrap prices have followed the upward trend in nickel prices, with LME three-month nickel again trading above US$ 15,000 per tonne recently. In the USA, the Davis Index reports that prices for 330 solids have recently increased to around US$ 2.05 per pound, up from US$ 1.50 in May. Rising domestic steel and carbon steel scrap prices are also providing some support and contributing to improved scrap flows.

A weaker US dollar has been widely credited with supporting nickel and base metal prices while making US exports more competitive. But the export market for US stainless scrap has been extremely poor this year, with overseas shipments in January-July 2020 down 28% from the same period last year on weaker demand from, among others, Taiwan, India and Canada, according to Commerce Department data.

The list of other obstacles facing US scrap processors is long, including: deteriorating transportation and logistics markets; how to manage inventories; difficulty finding qualified workers; volatile commodity pricing; worsening credit insurance availability; and the ever-present squeeze on cash flows. With the US election coming up and still so much uncertainty surrounding the COVID pandemic impacts, businesses are also cutting back on capital spending. But scrap recyclers remain resilient, and hopefully the worst of the downturn is behind us.

Doug Kramer - Doug Kramer (United States)

Doug Kramer

Spectrum Alloys LLC (USA)

United States
Quarterly Report – September 2020