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Downward Drift

Features - Steel Industry Report

A downward drift in nickel prices and steady nickel pig iron output in China have restrained stainless steel scrap demand.

Brian Taylor September 7, 2012

Nickel pricing, which at times has soared during the past several years, has experienced a downward drift in 2012. Perhaps more troubling for processors and traders of nickel-bearing scrap, however, is that demand for stainless steel scrap from China—the world’s largest metals producer—has been muted because of high levels of nickel pig iron production there.

Several traders and recyclers pointed to these market conditions while presenting at the 2012 Bureau of International Recycling (BIR) World Recycling Convention this spring.

As the second half of 2012 continues, it is uncertain to what extent global economic conditions will provide a boost to a recycling industry sector that, while not lackluster, could use revitalization.


A Slower Sector

At the May 30 meeting of the BIR’s Stainless Steel & Special Alloys Committee in Rome, traders such as Barry Hunter of Hunter Alloys LLC, Boonton, N.J., pointed to both slow scrap flows and slack demand as concerns.

“Flows of scrap into wholesale yards remain slow,” said Hunter, who cited low industrial production and some scrap dealers holding inventory awaiting higher prices. On the scrap demand side, Hunter stated, “Stainless scrap requirements for April mill deliveries were reduced, and May requirements have already indicated a continued reduction in demand.”

Demand from China remains muted. “There continues to be abundant supplies of nickel-bearing pig iron at cost-effective prices” in that nation, said Mark Sellier, who works from the Hong Kong office of OneSteel Recycling.

While Frank Waeckerle of Cronimet’s Germany office said “demand for clean and homogenous scrap out of processing plants is high” in Germany and some neighboring countries, plenty of worrisome news also is coming out of Europe.

“Scrap availability seems to become poorer,” reported Sandro Giuliani of Italy’s Giuliani Metalli. He also cited “a decrease in manufacturing activities” and that “dealers are reluctant to sell the scrap they have stored at higher values.”

Committee chairman Michael Wright, who works in the United Kingdom for ELG Haniel GmbH, reported slower melting schedules in the U.K. and “a fall in stainless steel scrap availability” similar to the conditions spelled out by Hunter and Giuliani.


A Nickel's Worth

The recent story of the price of nickel on the London Metal Exchange (LME) has been one of a downward trend.

From April 2011 to July 2012, the per-metric-ton cash settlement value of nickel on the LME has taken the following path:

April $26,321.39   January 2012 $19,814.52
June $22,344.32   March $18,701.59
August $22,075.23   May $17,014.77
October $18,879.29   July $16,151.14
December $18,144.25      

 

As speakers at the BIR session indicated, there seemed to be several supply-and-demand-related reasons for the fall in nickel pricing.

On the supply side, the historically high pricing reflected in the February 2011 LME nickel price helped spur production of the Chinese nickel pig iron mentioned by Sellier as well as boosting mining activity around the world.

Some scaling back of mining activity may be occurring as of mid-2012. A Reuters news item in early July reported that Vancouver-based CaNickel Mining Ltd. is keeping its operations at the Bucko Lake Nickel mine in Manitoba in suspension because of low prices.

Hitting the Century Mark

At the 2012 Bureau of International Recycling (BIR) Stainless Steel & Special Alloys Committee meeting in Rome, guest speaker Pascal Payet-Gaspard of the International Stainless Steel Forum (ISSF), Brussels, referred to the stainless steel industry as “facing many challenges” but having “a bright long-term future.”

Among the challenges cited by Payet-Gaspard was raw materials price volatility, which makes it “extremely difficult for the industry to guarantee a price” to manufacturers trying to budget the cost of finished goods, he noted.

Another challenge is mill overcapacity in the world’s developed economies and potentially in the future in China, where “a lot of provincial governments are pushing for new plants,” he commented.

Providing long-term hope, said Payet-Gaspard, was the increased efficiency of stainless steel producers who have tried new techniques to cope with market volatility. As well, the stainless industry has become very good at recycling what it produces, with only 18 percent of stainless steel being discarded in landfills, according to a Yale University study and ISSF statistics.

In an ISSF video shown by Payet-Gaspard, the narrator notes that in the last 40 years stainless steel production has grown from 3 million metric tons per year to 30 million metric tons per year.

As well, the first patent for stainless steel is just 100 years old, having been obtained in Germany in 1912. After this first century of steady growth for the material, “just imagine what it might make possible in the next 100 years,” according to the ISSF video.

The 2012 BIR World Recycling Convention was May 30-June 1 at the Rome Cavalieri Hotel in Italy.

The site also has been the subject of a provincial engineering review and audit, but in announcing the ongoing suspension of operations, CaNickel also pointed to nickel prices that have fallen in 2012 as a reason to forego resuming operations.

Chinese nickel pig iron, produced from laterite nickel ore, has been supplying stainless steel mills in that nation with considerable feedstock since 2006. “Chinese stainless steel producers use nickel pig iron, to which they will add chromium and other materials, to produce 200- and 300-series stainless steel, which accounts for more than 70 percent of total stainless steel production in China,” says China Steel Australia Ltd. on its website.

While this material has greatly curtailed demand for imported stainless steel scrap in China for the past several years, the reservoir of nickel pig iron may be draining quickly. China Steel Australia Ltd. goes on to say, “With the Chinese Government Steel Industry Restructuring Program, many nickel pig iron producers have been shut down due to poor environmental standards,” and that “Chinese domestic growth demand for nickel and nickel pig iron far exceeds the increase in production of nickel in China over the next few years.”

The company adds that its Linyi nickel pig iron plant “is environmentally certified,” and that “with demand still growing at a rapid rate and supply of nickel pig iron being substantially reduced, demand for nickel pig iron from producers like China Steel is very strong.”


Still Somewhat Demanding
While demand in China for finished stainless steel and mill feedstock may be strong, demand in other parts of the world has been less vigorous.

Finland-based stainless steel producer Outokumpu Oyj says its 2012 first quarter can be characterized by “improvement in profitability [as] a result of higher delivery volumes” but that “a somewhat weaker mix had an adverse effect.”

The company continues, “As a result of the recent decline in the nickel price and a weaker product and geographic mix in the second quarter, Outokumpu’s average base prices for stainless steel in the second quarter are expected to be flat or slightly lower than in the first quarter.”

Spain-based Acerinox Group also enjoyed a profitable first quarter of 2012. In its accompanying comments, the company points to “recovery of the American market [that] has allowed us to maintain our optimism in spite of the weakness of the European market.”

Results from Acerinox’ North American Stainless subsidiary in the U.S. have been encouraging. North American Stainless operates a sizable flat and long products stainless steel mill in Ghent, Ky. As of mid-August, the mill was reporting three-to-eight-week lead times.

“The United States market is in a clear recovery process since the month of November and continues to be the most solid one,” reports Acerinox CEO Bernardo Velázquez in a late April news release. “We had already mentioned that some indicators, such as the sales of trucks or investments in energy plants had improved, but now we can say that practically all sectors—even those related to construction, such as sinks or white goods—are in sound recovery, and the feeling of our customers and sellers is optimistic. This situation is favoring North American Stainless, which is performing even better than the market and reaching a high level of competitiveness,” he adds.

Acerinox’ view of its home European market was far less favorable. “The apparent consumption of the European market has decreased 3 percent with respect to the first quarter of 2011, as per preliminary data from Eurofer,” Velázquez says. “The lack of confidence in the face of the economic and financial situation, in addition to the scarce visibility and the forecast of declining prices due to the fall of alloy extras, has caused [a de-acceleration] of stainless steel consumption.”

The second quarter of 2012 has brought good and bad news, as investors and metals producers interpret the economic data.

A demand index calculated by the International Stainless Steel Forum (ISSF), Brussels, shows an upward trend for finished stainless steel since early 2010. After the index (which uses 2005 as its baseline 100 figure) dipped from approximately 125 down to 115 between mid-2008 and mid-2009, it has been moving upward, reaching the 160s by the start of 2012.

That trend line could explain that even while companies like Outokumpu and Acerinox have concerns about the future of the Eurozone, they can take comfort in being part of a growing industry sector.

Pascal Payet-Gaspard, secretary general of the ISSF, told BIR delegates in Rome (See “Hitting the Century Mark” above, on the right), “despite current difficulties shared by many heavy industries, the stainless steel industry has a bright future” in light of growing applications.


 

The author is editorial director of Recycling Today and can be contacted at btaylor@gie.net.

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