The balance of power is shifting in the world of stainless steel. Before emerging markets began to heavily invest in stainless steel production Europe and Japan were the source for much of the world’s stainless supplies. As recently as 2008, Europe was still exporting 1.6 million tons of stainless steel. But the rise of emerging market production capacity has been relentless such that now Europe finds itself in a similar situation to Japan as it looses export markets and its domestic markets remain slow growing at best. Acerinox for example has reached agreement between management and its trade unions to facilitate production cuts of up to 50 percent through the whole of 2010, although just last week it said it may increase production in February to meet an uptick in orders from North Africa. Acerinox’s recent announcement that they would produce duplex grades is probably a reflection of the challenge the firm is finding competing in the commodity end of the stainless market.
The same process may now be happening to some of those emerging market sources, at least in Asia as Chinese output is crowding out its neighbors. China’s production has increased more than 22-fold in the last ten years and an article in azom quotes a MEPS forecast that China’s stainless capacity will increase further over the next five years. This is likely to exceed any potential growth in domestic demand and lead to increased availability on the world market. Taiwanese producer, Tang Eng, has been forced to cut output in the last two months and South Korea’s Posco may restrict operations in January. Although growth in home demand should be sufficient for both countries to maintain their current capacities, in the future their export markets will be cramped by growing Chinese capacity.
India has grown rapidly over the last decade such that it is now ranked fifth in the world according to SK Roongta, chairman of Steel Authority of India Limited (SAIL). He is quoted as saying, “Going by the current growth trends India is expected to be the second largest producer of stainless steel in 2015 after China. Chinese material has been dissuaded from entering the European market recently by pending anti dumping cases. Indian producers are calling for similar protection against low cost Chinese imports as even their production levels were hit in 2009.
Figures from the International Stainless Steel Forum (ISSF) reported in the Engineering News underlined the position. In 2007, global stainless steel output was 27.8 million tons, which decreased by 1.9 million tons in 2008 to 25.9 million tons. Excluding China, stainless steel production in Asia was five million tons in the first nine months of 2009, which was a year-on-year decline of 23%, owing to lower output in India and Japan, while production remained flat in Korea and Taiwan. Stainless production in China however was 6.6 million tons in the first nine months of 2009, an increase of 19.1% on the same period of 2008. The ISSF reported that China accounted for almost 37% of the world’s stainless production. At the end of the third quarter of 2008, China’s market share was just 26%.