A remarkable turnaround in stainless scrap demand has transformed the world market. "We are facing a severe scrap shortage," Chairman Michael Wright of the UK told the Stainless Steel& Special Alloys Committee of BIR during the Spring Convention of the world recycling federation in Madrid.
World consumer demand could rise by between 3 percent-5percent this year, but availability of purchased scrap was expected to fall by some 700,000 metric tons - around 13 percent. In West Europe a drop of 300,000 metric tons or 15 percent to 1.5 million metric tons was anticipated. Supplies from East Europe could fall by 24 percent from 800,000 to 600,000 metric tons.
Wright explained the causes of this dramatic situation. First, lower stainless production in the second half of last year had reduced availability of new production scrap. The second factor was price sensitivity -high nickel prices tracking high volumes of reclaimed scrap and lower nickel prices leading to reduced volumes. Third was the reorganization of Russian exports through selected ports, initiated this past February. Depending on how long this took, a predicted shortfall of 200,000 metric tons might widen and even double.
Examining the consequences, he said European consumers would have to reduce the average charge of purchased scrap by 40 percent to approximately 30 percent to 32 percent of the total. Demand for primary nickel and chrome would increase, possibly resulting in a rise in nickel pricing. If worldwide austentitic production rose by only 3 percent this year, demand for primary nickel and chrome would expand by 15 percent to 16 percent. Between October 2000 and the end of March this year, Wright pointed out, the LME nickel price had dropped from $7,000 to $5,800. But in April/May it increased to $7,500.A further consequence of tightening supply would be a reduction in scrap discounts.
The past year, he commented, had seen a roller-coaster effect on demand, availability and pricing. It had never been more important for consumers and suppliers to work closely to ensure continuous supplies and stable market pricing.
Barry Hunter - former chairman of the Committee and now President of BIR - reported that in the United States, after "a decent increase in consumer buying activity" during April, May had seen” decent turned into dramatic". Exports flowing at around 40,000 metric tons a month, lower domestic arisings as a result of a slowing economy, plus the influences of rapidly-rising LME nickel pricing and continued strength in the high temperature alloy business, had combined to bring US consumers” roaring back into the buying market".
A shift away from exporting, he said, could become significant, but so far latest figures - for February - showed 25 percent of U.S. stainless scrap shipments going to Europe. That compared with below 10 percent for the whole of 2000, and was without any material going to the Spanish market.
Hunter questioned the situation in the United States once North American Stainless came on stream with 800,000 metric tons annual production capacity later this year. Where would the scrap come from? Perhaps the U.S. would become an importer - as had happened with carbon steel scrap. The roller-coaster effect that characterized the stainless business seemed to be increasingly challenging, said Hunter. He believed the ride was nowhere near over.
In a round up of European market reports, Wright demonstrated that the message was the same: from March/April onwards producers were expecting an increase in demand for scrap against a background of low availability.
More stainless steel employing more stainless scrap
Secondary metal would continue to be a major raw material in the manufacture of rising quantities of stainless steel, said Rafael Garvin, a director of the Spanish producer Acerinox. A careful mix of scrap grades with a density of 0.6 to 0.8 metric tons per cubic meter brought a 5 percent saving in electricity as well as easing the melting process and reducing refractory consumption.
Control of scrap quality was essential in ensuring the correct composition of a melt, stressed Garvin. Of particular concern were tramp elements such as copper, tin and lead, which could not be reduced, in the metallurgical process. "So preparation is very important, and collaboration between the processor and steel-maker vital," he said.
With availability of stainless scrap currently under pressure, the great flexibility of electric arc melting meant that raw material proportions could be changed. If necessary more carbon steel scrap could be charged. Normally Acerinox used 60 percent to 75 percent stainless scrap.
Two underlying trends in the stainless steel industry had continued largely unchanged for several decades, explained Garvin. While global output had risen by 4 percent to 5 percent a year the product price had fallen by about 2 percent. The first-rate properties of stainless steel made it a very attractive material, but the driving force of the continuous increase in its use all over the world was the declining price level. There was high market potential for the future, but the price decline might continue. Much depended on the rate of capacity development.
A more recent complication had been a dramatic change in market conditions with prices moving up and down in a very short period.
To keep in business against this background, the producer of stainless steel had to reduce operating costs and improve efficiency. "Stainless steel used to be a very comfortable business," remarked Garvin, "but price reduction changed all that."