May 2, 2024 Henrik Ørskov, Jan Knaak
Market trends for Stainless Steel - May 2024
Welcome to the latest market insights from Damstahl, where we delve into the dynamic world of stainless steel trends. You will get a closer look at the current market development and be updated on the situations within price development, energy and transportation as well as the availability of the different product groups.
General market trend
With one full quarter and nearly one month in the books we still sense that the market in general remains volatile and the uncertainty about the future is still high, even though it’s becoming more optimistic in all market-places. New conflicts having an impact on the geopolitical situation and giving an even harder time to predict the market for the coming months.
The Chinese economy did not come back to the full extent yet, even though the stainless steel production took an impressive increase in March (+ 11% yoy). This being said, this increase didn’t follow any higher demands, but was mainly driven by economical goals that need to be hit.
Raw materials
Nickel (LME 3 month)
Nickel did over the last two months took a large and expected step upwards in pricing, with only a short pause in the beginning of April. With the 19th of April Nickel broke through the 19.000 $/ton mark. Mintec does now forecast upwards trend in the coming months, aiming for +23.000 $/ton.
Recently both the US and UK governments have announced new sanctions against Russia, including the ban of nickel, aluminium and copper from new production. This should have further upwards pressure on the prices included.
Chromium
The new Chromium-benchmark price for Q2/2024 has been recently announced with 1,52 $/lb. which means a plus of 5,6% compared to the Q1/2024 price that has been at a level of 1,44 $/lb. As mentioned in earlier Market Trends from our side this price is very hard to predict and we have no outlook for the further trend.
The upwards trend in pricing for Chromium could be argued with some production cuttings in several countries except China and a seasonal pattern.
Ferromolybdenum
Ferromolybdenum remains rather stable with prices between 47.000 – 48.600 $/to. The overall trend for this raw material shows that the demand for Ferromolybdenum is increasing due to the higher qualities being produced in China and Indonesia. Since there is a deficit in supply expected, prices may remain on a high, but stable level.
Energy costs
Entering the warmer season of the year now, we don’t see and we don’t expect the prices for energy increasing over the coming months. Still the stocks for natural gas are sufficiently filled and there are no shortages to be expect. Currently the price for Natural gas is being displayed with 31,80 €/MWH, which is a slight increase due to high geopolitical uncertainty. Anyways the demand is rather low which will put downward pressure on the price for gas.
Freight situation
Road
In general, the market is still experiencing a slowdown. Lower spot rates than contract prices can still be achieved, indicating an overcapacity of supply. With slightly decreasing transport prices and a still high interest/leasing cost level, the natural development and renewal of the fleet to more environmentally friendly vehicles is unfortunately not encouraged.
In the current climate, companies are looking for "cleaner transport" and a green profile. The ambitions are high and are supported by EU requirements. In the long term, there is potential for a bottleneck in this area when the market turns and demand increases again.
Oil prices seem to have been in a stable period in the past period.
Sea
The Houthis continue to attack shipping in the Red Sea, so still a chaotic and unstable situation. Shipping companies had announced price increases from April. The rest of the industry was sceptical as demand remained low.
Last week we’ve received an information about China occupying huge capacities in the container-market to move the electric cars from China to Europa and the U.S. This isn’t only causing price-increases of approx. 400,00 $/container (40 ft.) and what is even worse: It's creating huge trouble on the availability of freight-room and in regards to the next Safeguard-quota this could cause some delays.
Air
Air freight succeeds in keeping prices up. In particular, goods from Bangladesh, Pakistan and India have been converted to air freight in the last month or two as a direct consequence of the situation in the Red Sea. This route arrives in Dubai, where there is a natural hub for the goods to be distributed throughout Europe.
Dubai was also recently hit by a severe storm. 162.8 millimeters of rain in just 30 hours. This is equivalent to more than a year's worth of rainfall and obviously made it impossible to maintain daily operations in and out of Dubai. Ergo, even more pressure on shipments through the Dubai hub in the form of longer transit times and higher prices.
Scrap
Scrap prices went from a longer stable period to increasing. Scrap is overall being faced with higher demand on a global scale – which causes a stabilization in prices. Sources from Asia tell that sourcing scrap for the melting-shops is becoming more difficult, especially finding the right quality of scrap.
Again we would like to highlight that scrap plays a key-role in the green agenda for the stainless steel industry and will therefore become a critical raw material over time.
News on products
Bars
The supply situation for bars in general is very stable at the moment. For some European producers we can see very short delivery-times with approx. 2 – 3 months.
Out of Asia prices and delivery-time also remain stable and orders placed now will be delivered for arrival before the October-quota. Interesting to see was that the Safeguard-quota for April hasn’t been fully used within the first days like we have with other quotas before. This mainly being driven by the container-vessels not arriving on time.
Tubes (Seamless)
Within seamless tubes the supply-situation does also remain stable. We can see rather short delivery-times coming from European produces, while the delivery-time out of India remains stable with 6 – 8 months. All in all there are no major concerns in this product-area.
Tubes (Welded)
When looking into the situation of welded tubes our tube mills still have relatively high stock volumes which equals good availability and short lead time when we’re talking about commodities. We see several customer segments with good activity.
There might be and effect when we’re looking into JUN/JUL-24 due to the missing output of coil material.
Sheets
Since our last Market Trends in February this year, a lot has happened in this category, especially in Europe, where Outokumpu has been on strike and Acerinox is still on strike, now in its 12th week. We are somewhat surprised by the minimal effect we have seen so far, as all logic suggests that prices will rise significantly when approx. 50% of the output in Europe is out of the market for a longer period of time. The availability is very challenged and we hear of many who have postponed their open orders and we are once again experiencing restrictions on how much we can order from the mills. And when all are utilizing 100 % of their capacity nothing much can go wrong without having bigger consequences. We are sure that we have not yet seen the full effect of the lack of output and at the time of writing this the strike at Acerinox is still ongoing.
Fittings and Flanges
While prices for fittings made from tubes are still rather stable even though prices for welded tubes are increasing. This will be coming with a slight delay. At the same time prices from Asia on fittings are increasing a lot, since prices for raw-material and currency are increasing. The availability of our standard grades—4307, 4541, 4404, and 4571—is good. Although transportation times for items shipped from Asia are still extended, our stock levels are satisfactory across all standard dimensions.
Price development
We still believe that prices will increase in the coming weeks and most likely until June/July this year. Due to the following reasons:
- The nickel quotation is below a reasonable level and has entered an upgoing trend. According to Mintec, the quotation for the coming year will increase to an average range of 18,000 – 22,000 USD/MT, and we just saw a breakthrough 19.000 $/ton mark
- Mintec has changed their advice of hedging of stainless steel to: Plan – covering the rest of Q2-2024
- We believe we’ll see a level of + 3.100 €/ton in CRC 304
- Mintecs advise on Nickel is changed to Full hedging (from an end-user perspective)
- The current situation in the Red Sea means longer delivery times and significantly higher prices for products outside Europe
- The strike at Acerinox is still ongoing
- Longer lead times / limitations from EU stainless steel sheet producers. As a result, a total of app. 50 % of European production of sheets has been out of the market for at least 2 months (Acerinox running on the 12th week)
- Stainless steel scrap prices are increasing
- Prices from Asia is also increasing
So for us price increases are the only logical conclusion.
Conclusion
We’re for sure looking into a market where everybody, or at least all of our European costumers and partners, are awaiting the announcement or move from ECB on their plan for the interest rate for the coming period. We hear from a lot of players in the market that the demand is there, but there’s a huge part of “wait and see” mindset in the phase we’re in right now. So if we see lower interest rates and inflation we’ll most probably see a good increase in the growth in EU and then we’ll need to make sure that we have enough material on stock also bearing the down streams effects of the reduced output from Outokumpu and Acerinox in mind.
Do you want to know more?
Henrik Ørskov
CPO & Supply Chain Director, Nordic
hoe@damstahl.com
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