Quarterly Report – February 2021

As COVID vaccination programmes gather pace, it seems as though Asia - and in particular Taiwan - will not be receiving any vaccines until April at the earliest. At the same time, we appear to be entering a new phase in which the markets show more care about a greener world. On the business front, we are waiting to see what China’s new scrap regulations will mean for our sector. Meanwhile, container space shortages are being felt inside Asia.

From its October 2020 level of around US$ 15,000 per tonne, the nickel price improved to above US$ 18,000 before steadying at approximately US$ 17,000. The stainless steel market was generally stable in the fourth quarter of last year and looks set to remain so for the rest of quarter one.

The final three months of 2020 brought stable demand for stainless scrap from mills in Taiwan and South Korea, but pricing remained under pressure as Indonesian nickel units - in the form of NPI and hot coils - continued to enter these two countries. According to Taiwan’s customs statistics, the share taken by Indonesian stainless hot coils and flat products has again inched higher, accounting for approximately 40% of Taiwan’s stainless coils market in December 2020.

Inside China, stainless scrap demand was weak until around mid-November, and then demand and pricing started to rise from December onwards, along with steel scrap prices. China’s stronger recovery from COVID in economic terms is translating into improved demand for stainless steel products, with the result that raw material prices are climbing within the country.

Japan’s stainless scrap demand stabilized in last year’s fourth quarter but was still low compared to previous years as Olympic construction projects have now been completed. Also, owing to mergers, there are only two stainless producers in Japan, hence overall production capacity is capped at approximately 2.5 million tonnes per year. 

The COVID situation in India is gradually improving but the economy is continuing to move slowly for a number of reasons. The vaccination drive is at full speed but, owing to the massive size of the country’s population, it will take time for the majority to receive their inoculations. GDP has been dipping and much concern has been shown for the overall health of the economy. 

Changes introduced in the Indian budget mean stainless scrap imports are now attracting zero duty. However, anti-dumping restrictions were lifted on certain stainless products, thus putting pressure on Indian mills. There has been a steady increase in imports of ferro-nickel and also NPI as an increasing number of mills are able to reduce their final production costs. 

Owing to rising nickel prices, plants face working capital shortages because their margins are very thin and production costs have increased in excess of 30%. Banks have not been very supportive and financial tightness remains within the economy.

Logistics has been one of the biggest bottlenecks as containers are not available and freight rates have continued to increase on a weekly basis. A lot of cargoes cannot be shipped owing to this lack of container availability. Furthermore, trade in lower-value items like chrome steel and 200 series stainless has reduced substantially as the very high freight costs do not justify the trade.

We look forward to seeing how the new US President handles trade and economic policies, and also how quickly COVID is brought under control so that, hopefully, global trade can resume previous levels.

Vegas Yang - Vegas Yang (Asia)

Vegas Yang

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

Quarterly Report – February 2021