BIR Speakers Feel Stainless Oversupply Will Continue

According to several speakers at the recently concluded Bureau of International Recycling’s spring convention, the slowdown in global stainless steel production during the last half of 2006 had been less marked than anticipated, such that production jumped 11.7 percent over the course of last year to 28.4 million metric tons.

However, Michael Wright, chairman of BIR’s Stainless Steel & Special Alloys Committee, noted, "The market began to swing to an oversupply situation during the first part of 2007." Wright also works for UK-based ELG Haniel Metals Ltd.

And, he Wright continued, feedback from producers in Europe suggested "this situation will continue certainly during the third quarter of 2007", he told delegates in Athens.

Consumers of stainless steel products appeared to be attempting to shift their orders to lower-value ferritic and chrome manganese grades, according to Wright. Europe’s stainless steel producers had cut their scrap purchases in the second quarter of this year and were expected to do likewise in the third quarter.

Barry Hunter of Hunter Alloys LLC agreed that current consumer requirements for scrap had "really slowed down". The high price of nickel was being widely blamed for austenitic stainless production cuts of, in some cases, 10-15 percent going forward. "The price of nickel has taken its toll on the standard grade of 304 or the basic 18/8," he said. "Our mills and their customers are moving towards - and successfully marketing - more and more substitute 301, 201, duplex and ferritic grades."

Turning to exports, Hunter noted that U.S. overseas shipments of stainless steel scrap had soared almost 60 percent to around 260,000 metric tons during the first quarter of this year.

Ildar Neverov of Scrap Market Ltd identified a contrasting trend in Russia, with stainless scrap exports dropping from 320,000 metric tons in 2005 to 286,000 metric tons last year. In South Africa, meanwhile, a strong local currency and lower prices in Europe resulted in an increase in domestic scrap consumption, according to new Committee board member Mark Sellier of Capricorn Stainless.

A report prepared by analyst Heinz Pariser, owner of HHP Alloy Metals & Steel Market Research and Publications in Germany, also reflected the depth of the trend away from austenitic steels. The report noted that the nickel chrome ratio of stainless steel production would decline from around 75 percent in 2001 to close to 60 percent by next year, whereas production of chrome manganese grades would jump from 3 million metric tons in 2005 to over 4.5 million metric tons next year.

On a global basis, high nickel prices were expected to stimulate a 15.5 percent increase in stainless steel scrap availability this year and a further 9 percent jump next year. "The stainless steel scrap market will continue to grow and to contribute additional nickel units of about 80,000 metric tons per year - or a growth of 8-9 percent per year," it was noted. Pariser’s report anticipated that additional units in the form of nickel pig iron would be seen, particularly in the Far East, and that this trend could contribute to a nickel surplus and lower prices.

According to the special alloys market review from Stuart Freilich of US-based Universal Metal Corp., the world was experiencing "a major military build-up" with "virtually every country" increasing its expenditure on new weapons. In the "booming" commercial aerospace sector, meanwhile, suppliers of planes, freighters, helicopters and business jets were booked out through 2012. These strong growth trends were likely to result in higher titanium scrap prices by next year, the speaker suggested.