BIR Autumn Round-Tables: A Bubble for Stainless Steel?

The recent phenomenon of nickel pig iron (NPI) production in China has resulted in a drop in scrap needs in the country. At the same time, the growth in China’s internal and external scrap volumes could create a stainless steel “bubble” over the next several years, according to Heinz Pariser, a guest speaker at the Bureau of International Recycling’s (BIR’s) Stainless Steel & Special Alloys Committee, held at the BIR’s autumn roundtable in Warsaw, Poland, Oct. 29, 2013.

According to Pariser, over the past 10 years the use of NPI has grown from a negligible amount to around 57 percent of the Chinese stainless steel industry’s external raw material purchases now. Meanwhile, the use of stainless scrap has dropped from 52 percent to 11 percent over the same period, according to Pariser, who is the head of Heinz H. Pariser Alloy Metals & Steel Market Research, based in Germany.

Assuming low recycling ratios, Pariser said China’s stainless scrap reserve was expected to increase from less than 20 million metric tons in 2012 to 62.2 million metric tons 2020 and to 164 million metric tons by 2030, which would be a significant challenge for the stainless scrap industry. He also noted that China’s preference for NPI is a significant “disaster for the scrap industry.”

China also was the point of focus for the meeting’s guest speaker when reviewing world stainless steel output and demand trends. Pariser predicted that global stainless melting production would climb 5.9 percent to nearly 37.9 million metric tons in 2013 and a further 6.5 percent next year to 40.37 million metric tons.

However, output in China was expected to jump 13.8 percent in 2013 and 10.1 percent in 2014 to 20.5 million metric tons, more than half of the world total. For the same two-year period, stainless steel production in the European Union is likely to decline by 5.2 percent this year and 2.3 percent in 2014, while production in the United States will show an increase of 3.5 percent this year and a much stronger 12.3 percent next year, Pariser noted. 

In his remarks, Pariser said China was “overdoing it” in terms of stainless steel capacity expansions. He pointed out that increases were running ahead of demand and leading to growing global oversupply. Having voiced his belief that China’s production capacity would exceed 30 million metric tons by 2015, he added, “There is a big overcapacity in stainless steel and a big decision needs to be made.”

Also discussing the stainless steel market on the BIR panel was Mark Sellier of OneSteel Recycling. In his remarks, Sellier said in China there was a “period of uncertainty” in summarizing latest developments within the global stainless steel industry. The balance between scrap supply and demand is “moving towards tightness” in the United States where most small dealers were currently “low on stock.” In Europe, Sellier added, stainless steel production has declined, although not dramatically, and scrap values in relation to the LME (London Metal Exchange) also had headed lower as of late.

Meanwhile, Sellier said stainless steel scrap demand was stable in India, “but securitizing sales to that market remains a concern.” As for Russia, evidence suggests that lower scrap export duties could be countered by the possible introduction of an environmental tax.