Nornickel sees stainless steel demand slump, protectionism slowing nickel recovery

The significant drops in stainless steel end-use demand in the US and the EU are prompting increased calls for protectionist measures and slowing down the recovery in the stainless steel industry, which accounts for 70% of the nickel applications, Russian company Nornickel said in its latest market outlook.

Nornickel estimates primary nickel consumption in the US and EMEA falling by 13% this year from 2019 to 47,000 mt and 178,000 mt respectively.

In Europe, while stainless mills are already ramping up production, the impact of the end-use demand contraction remains the biggest concern. Germany, Europe’s largest economy, saw double-digit declines in orders for machinery, electrical appliances and motor vehicles in March.

In the context of the coronavirus pandemic, the European Steel Association (EUROFER) has asked the Commission to slash the quota covered by the safeguard measures for steel, and implicitly stainless steel, by 75% for a period of six months. If approved, the reduction in H2 2020 could result in over 200,000 mt stainless output that could be produced locally instead, the equivalent of 7% of the EU’s half-year production.

The measure will top 6% to 18.9% provisional anti-dumping duties on hot rolled stainless steel products from China, Indonesia and Taiwan the EU imposed in April 2020. The anti-subsidy investigation against Indonesia and China is also underway with a decision due in Q3 2020.

Both the EU and the US are also large consumers of Chinese stainless end-use products. Apart from steel, China exports large volumes of fabricated stainless products, with about a quarter of its stainless production exported either directly or as finished products, Nornickel estimates.

Weak demand from these major end-use markets slows down China’s stainless industry recovery and the financial aid allocated by the Chinese government to the nation’s economy of 2.5-3.5% of its GDP cannot fully mitigate that impact. Nornickel forecasts nickel demand in the Chinese stainless sector will decrease by 4% this year to 1 million mt Ni.

Capacity ramp-ups with stainless rebound in view

Beyond 2020, the company expects the stainless steel industry to recover in line with the global economy. It sees potential for further growth, especially in developing countries where nickel consumption per capita is still low.

Last year, global stainless steel production absorbed 1.74 million mt of nickel, or 71% of the 2.44 million mt total consumed.

Pointing to brighter prospects are some Chinese producers’ pursuit of capacity ramp-ups. In February, Linyi Steel Investment started the construction of the 2.4 million mt/year facility due for commissioning by year-end. The company plans to produce 300 series (350,000 mt), 400 series (280,000 mt), and Duplex stainless steel (70,000 mt).

Also this year, Heibei Bishi Group plans to break ground on a plant with a 1.3 million mt/year 300 series capacity in Naiman, Inner Mongolia.

The country that seems to be even more incentivised to develop stainless capacity is Indonesia. While stainless exports from China declined by 320,000 mt, exports from Indonesia increased by 330,000 mt in 2019.

The availability of large volumes of lateritic ore with high nickel content and the integration of nickel pig iron plants with stainless steel mills in Indonesia has further bolstered the lowest cost industry.

So far, Indonesian stainless production has maintained at the 2018 levels (2.2 million mt) with the primary nickel demand at 173,000 mt Ni in 2019, but the figures may change should new capacities come on line, noted Nornickel.

— Ekaterina Bouckley