BIR: Stainless steel scrap market likely to encounter tough challenges during Q4

By Carolina Curiel (ScrapMonster Author)

September 06, 2016 06:24:08 AM

BRUSSELS (Scrap Monster): The recently released BIR World Mirror on Stainless Steel and Special Alloys predicts tough market conditions for stainless steel scrap during the last quarter of the year. Joost Van Kleef, chairman of the BIR stainless steel & special alloys committee noted that fourth quarter will be challenging for the market. The scrap market volumes and margins are likely to come under pressure, mainly on account of declining nickel prices.

According to BIR, stainless steel scrap availability has remained strong during recent months, mainly due to surge in commodity prices. The recent run-up in nickel prices was mainly due to the uncertainty over Philippines’ mining policy and the series of mine closures in that country, that created fears about contracted mine supply. The realization that the country lacks necessary infrastructure to boost its nickel pig iron output and the fact that its economy is very closely tied to nickel ore exports has led to gradual fall in nickel prices from its peaks. The declining trend in nickel prices is likely to continue during the fourth quarter of the current year, which in turn may lead to declining scrap volumes and squeezed margins for recyclers.

Even as supply side concerns pose significant threat, BIR is hopeful of the demand side. The Chinese production of nickel-bearing stainless steel during the initial seven-month period of the current year jumped higher by nearly 10% when matched with the prior year. A continuation of this momentum in Chinese stainless steel production may lead to further rally in nickel prices. Incidentally, China accounts for more than 50% of the global nickel demand.

The crude stainless steel production by the EU region has declined by 2.5% during the first half of the current year, in comparison with the corresponding half-yearly period in 2015. Meantime, current market trends indicate extremely strong demand for stainless steel scrap, especially in countries such as Italy. The bulk scrap orders from Far East buyers are witnessing sharp momentum, BIR noted. The 316 grade stainless steel scrap is seen witnessing the highest demand. Meantime, the plunge in value of pound against the US dollar, following UK’s decision to leave the EU has led to significant surge in domestic stainless steel scrap prices in the UK. The UK scrap production has also remained robust during recent months.

The stainless steel order levels remained buoyant in the US. The markets reported tight availability of certain scrap grades such as clean, segregated 18/8 stainless steel scrap. India too reported healthy demand for stainless steel scrap. The offer prices for various grades of scrap in India continued to remain at higher levels when compared with other Asian markets such as South Korea and Taiwan. Local scrap availability has reduced the mills’ overdependence on imported scrap. However, there are signs of slowdown, BIR noted.

The high duties imposed by the Russian administration on scrap exports out of the country has led to reduced exports during the month of August this year. However, the lowering of duty in accordance with the WTO agreement may work in favor of scrap exporters and might result in revival of scrap exports. According to sources, duties on stainless steel scrap exports will be reduced from the current 7.5% to 5% effective September 1st.

About BIR

Founded in 1948, BIR was the first federation to support the interests of the recycling industry on an international scale. Today, BIR represents over 750 member companies from the private sector and 34 national associations in more than 70 countries. Together, these members form the largest international recycling federation.