December 6, 2023 Henrik Ørskov, Jan Knaak
Market trends for Stainless Steel - December 2023
In the stainless-steel industry, 2023 is marked by significant price drops and market volatility, intensified by the weak German market's impact on Europe. As the year concludes, customers are additionally refraining from stocking materials that won't be utilized by year-end, contributing to the overall uncertainty in the market. In 2024, we anticipate an expected market upturn and remain dedicated to providing our customers with valuable and comprehensive service. 2024 holds significance for Damstahl as our building projects materialize, allowing us to diversify our product range and enhance our delivery capabilities.
General market trend
The stainless steel market is definitely one of a kind, as you as a reader might know yourself. Currently the market is rather quiet, especially due to ongoing weak German-market which is the main-driver in Europe and since we’re heading towards years end, customers will not put material to stock that won’t be used within this year. It’s also expected that the regularly weak December will be even more quiet compared to recent years. The German association VDMA reports that Germany is running index 80 compared to 2022, but on the other hand the PMI (Purchase Manager Index) in Germany shows a strong development towards 42,3 points, coming from the bottom-line 38,8 points in July 2023.
CBAM still not up and running
We as importer of goods from abroad are deeply involved in the CBAM discussions going on. A mechanism to protect the European union from high-polluting imports is something you should definitely support, but the way it’s handled so far gives us issues as a company. However as an enduser you will not be involved in the complicated mechanism, but of course prices for Asian material would increase following the implementation.
On August 17, the European Commission finalized the definitive regulation on the CBAM-initiative starting from 1st of October 2023 with a reporting-phase and entering the full implementation by 1st of January 2026. CBAM (Carbon Border Adjustment Mechanism) is one of the big piles for the European green agenda and aims for a compensation for products being imported from countries with less restriction on CO2-emissions. The products affected are steel, aluminum, electricity, cement and fertilizers.
After attending several webinars on the procedure of CBAM from next year, there is no light at the end of the tunnel, meaning the website for reporting is still not working, and we still don’t know what and how to report the information needed. One concern is the evaluation of the entered data: Who is in control of that and makes sure that the CO2-data reported is validated?
Price developments
Nickel (LME 3 month)
Throughout 2023 Nickel has been behaving very strange in term of performance. Reporting a price of 19.500 $/to. in September, this price now fell sharply to a level of 15.500 $/to., which means that compared to the beginning of 2023 Nickel lost 50% of its value at the LME and hits a two-years low.
Giving an outlook on this raw-material is nearly impossible – there are several rumors about export-ban from Indonesia or reduced production of Nickel in Indonesia to secure the Nickel-reserves for coming generations. Also the talks about EV-batteries are holding on. All these factors could have an impact on the price of Nickel, but when and how much is out of sight at the moment.
Mintec however expects a sharp increase to a level between 20 – 25.000 $ within short.
Chromium
Beginning of October the Chromium-charge for Q4/2023 has been published and shows with 1.53 $/lb. a slight increase, but rather a stabilization of the price. The influence of the Chinese market has become much bigger within 2023. Still South-Africa holds the biggest reserves for Chromium, but due to the bad infrastructure inside the country, less of it can be transferred into Ferrochromium.
Ferromolybdenum
Similar to Nickel, Ferromolybdenum has lost value huge values in 2023. Starting the year with a price of 64.150 $/to. and a peak in February with around 105.500 $/to., the price for this material has now fallen to 42.000 $/to., which is a decrease of approx. 35% compared to January. The current price-level can be seen as a stable and ongoing price-level.
Scrap
Scrap-prices remain rather stable at the moment, coming with a price of 1.280 €/to. (V2A).
Since the overall stainless-steel production and consumption is on a low activity-level, supply and demand for scrap balance out fine for the moment.
It’ll be interesting to see the development going from 2024 onwards, since the green-agenda can only be handled with an increase of scrap-ratio inside the production for stainless-steels.
The stable scrap prices is also the reason for the prices not dropping based on the lower nickel price, as 85% of EU production of stainless steel is scrap based.
Energy cost
Natural gas was forecasted to increase in Q4 with a yearend peak, but until now the prices have been stable or only slightly increasing. European demand has been quite low due to mild autumn weather across the continent. Furthermore, the European inventories are nearly full, which is unprecedented. Strikes at Australian LNG export facilities and the conflict in Israel have caused some market volatility, but the supply risk appears to be contained for now.
Electricity
Also here we expected a seasonal increase in Q4. Prices have been weaker for longer than expected and the year end peak is still to be seen. Increasing costs should push electricity prices higher following the seasonal pressure.
At the same time we don’t see any development in the energy-surcharges being raised by the mills.
Transport
The activities of the freight forwarders are generally lower than at the same time last year. There’s free capacity out there for us transport buyers. Of course, we are in the middle of the peak season for items to be moved in connection with the holidays and after a Black Friday weekend, so there may be fluctuations from week to week. The German increase in MAUT has a significant effect in increasing prices which for sure will effect the steel business as well.
Road transport
The industry is still looking into future driver shortages, which could again affect supply. More drivers leave the profession than joining. Right now, 5% of drivers are under the age of 25, and more than 40% are over 55 and on their way to retirement. The industry is trying new measures to attract people into this sector.
Drivers are also moved from one industry to another over time, as the conditions of the industries change, for example in the construction industry, which unfortunately experiences lower activity.
The new additional German MAUT, or rather CO2 emission tax for trucks, is now a reality from 1/12 - 2023. Germany is a big market for most of us, and the impact is on all exports / imports Germany, for goods in transit in Germany, and of course for Cross-trade. The increase is calculated for approx. 83% (source: BWS)
Sea freight
ETS (Emissions Trading System) comes into force on 1/1 – 2024. This is a CO2 emission tax for sea freight. This applies both to the ferries to/from the UK, Norway, Sweden and Finland, but also to all overseas freight. The implementation will take place gradually until 2026, when 100% of documented CO2 emissions will be accounted for. Right now, the industry does not agree on how the calculation should be, and therefore the real cost per TEU is not yet known.
The extra German MAUT also comes into effect here, on containers that must be driven to / from Hamburg / Bremerhaven.
On the overseas market, demand generally continues to drop and the shipping companies are therefore not able to fill their ships in Europe. This results in several canceled departures and/or changes in routings, which in turn affect the punctuality of the ships 3 to 5 days. Europe's imports are largely stagnant since 2019, and exports have fallen by 10%. The freight level is therefore at a minimum, and since there are many new large ships ready to be launched now, there is still expected to be overcapacity in 2024, which is why it is expected that prices in Q1 – 2024 will continue to be under pressure – (Source: SCFI – Lars Jensen).
News by product group
Bars
Due to the overall low market-activity the availability of bars from both EU and India is stable and delivery-times are short compared to 2022. Over the year the situation has been rather similar and there have been no areas of shortages.
Additionally it can actually be seen that capacities in India are too high, meaning that following the overall EU-behavior of moving more quantities to India within 2023, the mills have lifted up there capacities now seeing that the market in the EU is satisfied and there is no more room for further growth at the moment.
On top of that Safeguard-measure are to be running out by end of June 2024, without knowing about a new measure that might follow the Safeguards yet, since the EU isn’t allowed to further prolong the Safeguards.
Tubes
The supply situation of tubes has not changed much since our latest “Market trends”
The overall availability is still good and lead times have become even more reliable unfortunately due to the lower market activity. But we still see several segments with high activity such as pharma and clean water and waste water so for the high runners within these segments we still need to plan well ahead.
Fittings and Flanges
Prices and availability for these products have been rather stable since March 2023. Now in November we can see a slight upward trend on these for the first time for months now.
Sheets
The delays from some mills we experienced after the summer holiday is now gone and we’re looking into a very stable supply situation. Although inventory levels have dropped in the past few months, buyers remain cautious about rebuilding their stocks amid the current market uncertainty. Therefor some European mills are considering to extend their scheduled maintenance period due to this low demand.
The European Commission’s anti-circumvention investigation into Indonesian-origin stainless steel cold rolled flat products has had a marked effect on international trade and imports into the EU has dropped significantly.
Sustainability
We have received very good news from our strategic partner Ugitech (FR) regarding the sustainability-agenda. Ugitech performed a full LCA (lifecycle analysis) on their products in bars for several grades. The LCA-analysis tracks the CO2-consumption on the different production-steps to give a much better understanding of the different lines of products. Therefore it’s much more detailed then just the reporting of a CO2-footprint for the whole mill and should be the way forward for all producers.
Conclusion
2023 is for the stainless-steel industry a very special year. Seeing both huge price-drops combined with a weak-market makes the business extremely difficult to predict.
For 2024 we expect and hope for a pick-up of the market and we’re prepared to serve all our customers with good service and a stable performance from our side. 2024 for Damstahl will be a very special year with our building-projects becoming reality and preparing us for all future challenges.
Henrik Ørskov
CPO & Supply Chain Director, Nordic
hoe@damstahl.com
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