Buying and selling stainless steel scrap has required extra patience in the first half of this year, according to members of Stainless Steel & Special Alloys Committee of the Brussels-based Bureau of International Recycling (BIR). That committee met in late May in Barcelona at the BIR World Recycling Convention.
This year’s extraordinary nickel pricing developments on the London Metal Exchange (LME) added to an already imposing list of challenges facing the stainless steel sector, committee members said.
Those challenges have included the Ukraine conflict and associated sanctions on Russian nickel exports, higher energy prices and their impact on production costs, rising inflation, lowered economic growth projections, major supply chain disruption and labor shortages. This confluence of events could be described as “a perfect storm," said Rosie Hill of United Kingdom-based Ireland Alloys in her market report to the committee.
Hill said the suspension of LME nickel trading between March 8 and March 16 “caused a loss of confidence in the LME’s ability to provide transparency and liquidity—this at a time of rising geopolitical risks.” Traders had been left “understandably upset” by the inability to price metal during this period, she added.
Robin Martin, LME head of market development, said the suspension followed a price spike in Asia that was regarded by the LME as “disorderly market trading” and “disconnected from any observed fundamentals.” He said the “controversial” decision had provoked “huge frustration,” adding that the LME was “under no illusion [but] that we have a lot of work to do to rebuild trust in the market”.
LME nickel volumes were down 15 percent to 20 percent on the corresponding period last year, thus indicating that users were “nervous of recommitting to the market,” Martin said. As part of the process of rebuilding confidence, reviews into these events were being conducted internally as well as by regulators and independent reviewers, he added.
Measures already introduced included the indefinite implementation of limits on price movements, initially pegged at 15 percent. Martin also called on delegates to work with the LME to make the market “more transparent and more resilient”.
During a discussion also involving BIR Stainless Steel & Special Alloys Committee Chair Joost Van Kleef of Netherlands-based Oryx Stainless and Omar Al Sharif of Sharif Metals in the United Arab Emirates, Uwe Dierkes of Siegfried Jacob Metallwerke GmbH & Co. KG of Germany underlined the impact of the suspension in trading, noting that many companies had been forced to pay a “huge” amount in margin calls.
Also, as part of her stainless steel market summary, Hill said safeguards and anti-dumping measures had failed to prevent duty-free Asian product imports from filling the European market at lower prices, prompting mills to seek a reduction in what they paid for their scrap. “The seasonal slowdown will put stainless pricing under further pressure,” she said.
In Asia itself, scrap demand in China had been slow, partly as a result of COVID-19-related lockdowns, while many mills in India were suffering from weak order books, said committee members.
On a more positive note, demand for superalloys had been improving in the aerospace sector while the industrial gas turbine market remained healthy, according to traders.
The 2022 BIR World Recycling Convention was May 22-25 in Barcelona.