'Significant' production cuts in the raw material sector will probably be required over the short and medium term if stability is to be restored to the markets, according to BIR stainless steel & special alloys committee chairman Joost Van Kleef. 'The entire stainless steel value chain is suffering from continuous, long-lasting and significant price erosion among all key raw materials,' he states. Stainless steel scrap 'is in short supply' and this trend 'will be halted solely by a market with rising prices, at least for the intrinsic nickel', he adds.
 
As emphasised by a number of reports to the Mirror, severely compromised scrap generation is placing a strain on merchants' margins. From Italy, the shortage of scrap is described as 'perhaps the source of greatest discomfort for our sector' and the result 'of lower manufacturing industry output, of almost non-existent demolition activity, and of our suppliers' decision not to sell the material that they have accumulated in their yards at prices much higher than those prevailing at present'. And from the UK it is added: 'Dealers cannot afford to release stocks at the prevailing market price.' With the lower values of stainless steel scrap, several of the Mirror reports also note the cost of freight has become a far more significant and potentially problematic issue.
 
Overcapacity and falling demand in China are identified as major factors in benchmark 304 stainless steel 2mm cold rolled coils being traded at US$ 1600-1650 per tonne CIF East Asian ports for March shipment - the lowest levels seen since February 2004. Despite the fact that the Chinese New Year holidays have now ended, the stainless steel market has remained 'rather flat' in response to 'subdued' buying interest.
 
In South Korea, consumers have reduced their scrap ratios and switched more noticeably from use of imported scrap to domestic arisings. 'They are unlikely to make a return to the import market until sometime in March,' it is added. In the Middle East, meanwhile, scrap dealers and yard owners have been adopting a wait-and-see stance in the hope of recovering some of the value that has been lost owing to falling metal values across the board. On the upside, general market expectations are for improved prices and higher demand for various raw materials in the second half of the year.
 
Staying with the positive, India remains 'one of the best-paying markets for 200, 300 and 400 series stainless scrap' as its mills continue to operate at a higher-than-average scrap ratio - 'the majority of which is imported'.‎ With India expected to maintain GDP growth of around 7.5% this year, domestic consumption of stainless steel should increase and the country should remain 'a comparatively good market' for stainless steel scrap suppliers.
 
That said, however, there are reports of slowing activity levels at Indian mills owing to, in part, 'the increasingly challenging task of selling finished stainless products amid weak global demand'. The shift in production to 200 series 'is becoming more visible', it is also observed.
 
On the international trading front, there are rumours that the EU and Turkey are planning to introduce anti-dumping sanctions against steel and other finished products from Russia - a move which, according to a senior government official, may prompt the Russian authorities to respond with scrap export barriers to these destinations.
 
In the USA, meanwhile, an anti-dumping and countervailing duties petition has been filed with the US Commerce Department against stainless imports from China. Made on behalf of AK Steel Corp, ATI Flat Rolled Products, North American Stainless and Outokumpu Stainless USA LLC, this will be a 'significant' ruling for these major US producers if upheld, and would increase domestic production of stainless.
 
It would also benefit a scrap sector blighted by reduced material values and limited flows, it is added.