According to International Stainless Steel Forum (ISSF) data, stainless steel melt shop production increased by 24.7% year over year to 14.5 million metric tons through the first quarter of 2021.
Most of the production increase came from Europe and the U.S., where production jumped by 11.0% and 9.7%, respectively. The only region that saw a production contraction was China. China’s production fell by 0.5% to 8,198,000 metric tons.
This coincides with a report by Precedence Research, in which it estimates the stainless steel market size to increase to U.S. $168.24 billion by 2027 from U.S. $106.84 billion in 2019.
Precedence anticipates a 57.5% increase over the eight-year period due to the growing preference for stainless steel over ordinary steel and its increasing application in pre-engineered buildings. Additionally, demand for steel from construction and automotive and transportation sectors is expected to keep growing.
On May 10, the LME three-month copper price closed at $10,720 per metric ton, hitting record highs last month.
Since then, prices declined below $10,000/mt.
SHFE prices followed the same trend.
The price retrace might be due partially to the stern warnings issued by Beijing about market discipline and excessive speculation in an effort to cool off prices.
Moreover, on June 7, trade data from China showed that copper imports fell 8% in May compared to the previous month. This might have scared some investors, as lower imports could mean lower demand, which decreases buying interest.
This could also signal that the pace of economic growth might be slowing. Along with less market speculation, that could mean the price will correct and consolidate.
Since April 2020, Chinese steel prices have traded up consistently with a short decline period around December 2020. Around mid-May, all forms of Chinese steel prices peaked, as demand continued to soar in China.
Steel demand in China increased in the past few months as the government implemented its economic recovery plan, which includes infrastructure spending. Increasing steel prices continue to bring up infrastructure costs.
On May 26, steel prices saw a price drop of approximately 20% for all forms of steel. The sudden price decline in China could have been triggered by the severe punishment the Chinese government threatened to impose on any excessive speculation and fake news that might inflate critical raw material prices, such as steel.
After Chinese prices corrected, they continued to go up but at a slower rate, closing May at CNY 6,060/mt from CNY 6,100/mt at the end of April. Since, they continued to increase the first week of June but remain below the CNY 6,250/mt level.
However, volumes do not suggest speculation. Rather, the Chinese government wishes to control the rising price situation. After all, a lower domestic price can help boost the competitive advantage for Chinese firms exporting value-added products.
The paper concluded that U.S. production of primary aluminum, including both alumina refining and secondary smelting and alloying of aluminum, increased by 37.6% to 1.14 million metric tons annually from March 2018 to February 2020. This increase came from the restart or production increase of five of the six smelters in the U.S.
The Stainless Monthly Metals Index (MMI) increased by 4.5%, as stainless flat rolled base prices continue to move upward due to extended lead times and limited domestic capacity (following a similar trend with steel prices).
Stainless steel producers raise prices
Stainless steel producers North American Stainless (NAS) and Outokumpu announced price increases effective for February deliveries.
Both producers announced a two-discount-point reduction for standard chemistry 304, 304L and 316L. For 304, the base price increase amounts to approximately $0.0350/lb.
Outokumpu diverged from NAS, as it increased all other 300 series alloys, 200 series and 400 series by reducing the functional discount by three points. In addition, Outokumpu also will be implementing a $0.05/lb adder for 21 gauge and lighter.
As the only producer of 72″ wide in North America, Outokumpu increased its 72″ wide adder to $0.18/lb.
Along with rising base prices, alloy surcharges are rising for the third month in a row. February alloy surcharges for 304 will be $0.8592/lb, an increase of $0.0784/lb compared to January.
Both NAS and Outokumpu are also revising their equalized freight rates, which take effect in March.
The Raw Steels Monthly Metals Index (MMI) increased for the ninth consecutive month, rising by 0.5% as US steel prices continued to rise.
Buying organizations should continue to buy as needed, as prices remain at all-time highs.
Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.
US steel market
Universal Steel Products, along with four other American steel importing companies, challenged the 25% steel tariff imposed by former President Donald Trump in 2018 under Section 232 of the Trade Expansion Act of 1962.
Meanwhile, President Joe Biden reinstated tariffs on aluminum imported from the UAE. Trump had rescinded the tariffs on his last day in office. Biden’s decision seems to signal that the new administration sides with primary producers in view of ongoing global overcapacity.
Tariff supporters argue it promotes steel investment, newer technology, increases domestic market share, provides security of supply for steel customers and generates employment. Meanwhile, detractors believe the tariffs directly impact US steel prices.
The graph below, however, shows the correlation between US steel prices and tariffs is not particularly strong.
Rather, the bullish market drives steel prices (as it did in 2018).
Today, steel prices have increased on the back of a bull market. In addition, capacity reductions have led to material shortages, as we see now.
The Copper Monthly Metals Index (MMI) increased for the fourth consecutive month, rising by 1.1%, as copper demand is likely to remain strong this year.
Copper prices traded sideways throughout January, which proved to be a slow month for the red metal. Most of its momentum over the past year came from China, which has stopped some of its manufacturing ahead of the Chinese New Year celebrations.
However, copper prices might pick up as key industries — such as construction, consumer appliances and automotive — continue to grow. Copper demand should also benefit from the “Buy American” policy that the Biden administration plans to implement.
The plan would promote the U.S. manufacture of essential components in construction, appliances, electronics and automotive.
The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.
Global copper demand
As mentioned above, it’s not likely that copper demand will slow down in 2021.
In the US, new home and home renovation demand spiked since the pandemic started, along with electronics demand. Analysts at CitiBank expect the copper market to shift into a deficit in the second half of the year with a minor surplus overall for 2021, Reuters reported. They also forecast deficits in 2022 and 2023.
The US Census Bureau and the US Department of Housing and Urban Development reported building permits in December increased by 4.5% compared to November and 17.3% above the December 2019 rate. Privately owned housing continued to increase in December, rising by 5.8% from the previous month and by 5.2% compared to December 2019. The uptrend started in September 2020.
China will continue to play an important role in the copper market. The country accounts for about half of global primary consumption, which is then used to manufacture export goods.
The Aluminum Monthly Metals Index (MMI) increased by 2.1% this month, as LME aluminum prices traded sideways and the US reinstated the Section 232 aluminum tariff on imports from the United Arab Emirates.
U.S. aluminum reinstates aluminum tariff on UAE
On Feb. 1, President Joe Biden reinstated the 10% aluminum tariff on imports from the United Arab Emirates.
Former President Donald Trump had lifted the aluminum tariff on his last day in office. The reinstated aluminum tariff went into effect Feb. 3.
The reinstatement suggests that it is unlikely the Biden administration will remove the aluminum tariffs imposed by the previous administration. However, as of today, no further decisions were announced on aluminum tariffs.
In addition, Biden’s “Buy American” plans could impact the U.S. domestic aluminum market. The plan will likely promote the manufacturing of essential components in construction, appliances and electronics in the US.
These measures are welcomed at the primary production level. However, not all end-product manufacturers are on board, as they claim these government interventions will artificially inflate the Midwest Premium.
The new administration also announced the delay of the effective date of the Aluminum Import Monitoring and Analysis (AIM) system that the U.S. Department of Commerce created. The Department of Commerce originally said the system would be available Jan. 25. However, it is delaying the launch until March 29. Licenses will not be required for covered aluminum imports until the new effective date.
A Midwest-based trader told Construction & Demolition Recycling that demand for aluminum scrap remains high at secondary smelters that supply the automotive industry in the US
Chad Kripke, an executive vice president of Kripke Enterprise, a nonferrous scrap brokerage firm, confirmed that many sellers are relying on the spot market rather than signing contracts for 2021. This signals that it is a seller’s market.
This market environment is due to the reduced flows of scrap, which has caused spreads to tighten. As a result, secondary producers are opting to purchase scrap at what they might view as high prices rather than risking a lack of material.
Besides the U.S. Midwest Premium Futures, the platform now includes prices for some of the most common forms of aluminum sheet and coil. It includes prices for: 1100 H14, 3003 H14, 5052 H32, 5083 H321, 6061 T6 and 6061 T651.
Price data goes back to Jan. 1, 2020.
Actual metals prices and trends
The Chinese aluminum scrap price increased 0.4% month over month to $2,067/mt as of Feb. 1. Meanwhile, LME primary three-month aluminum increased 0.4% to $1,988/mt.
Korean commercial 1050 aluminum sheet remained flat at $3.30/kg. However, its European equivalent increased 8.3% to $2,948/mt.
Chinese aluminum billet and aluminum bar rose 0.4% to $2,389/mt and $2,489/mt, respectively.
Chinese primary cash aluminum dropped 2.4% to $2,365/mt. Meanwhile, its Indian counterpart declined 2.2% to $2.24/kg.
The Stainless Monthly Metals Index (MMI) increased by 6.0% this month, as ATI issued a major announcement and China ups its stainless imports from Indonesia.
ATI exits stainless steel commodity market products
Allegheny Technologies Incorporated (ATI) announced Dec. 2 that the company would exit the standard stainless sheet product market. The move reduces availability of standard 36″ and 48″ wide material.
The announcement comes as part of the company’s new business strategy. ATI will focus on investing in enhanced capabilities on higher-margin products, primarily in the aerospace and defense industries.
ATI’s departure from the stainless steel commodity portion of the market also leaves a gap for 201 series materials, which is why 201 base prices will see bigger increases than 300 or 430 series materials. Both NAS and Outokumpu announced a 201 base price increase amounting to approximately $0.0500/lb.
The Raw Steels Monthly Metals Index (MMI) increased by 16.5% this month, as steel prices showed strength in December.
U.S. steel events
The American Iron and Steel Institute, the Steel Manufacturers Association, the United Steelworkers union, the Committee on Pipe and Tube Imports and the American Institute of Steel Construction sent a letter to Joe Biden urging him to keep the 25% national security tariffs on steel imports that were imposed in 2018.
The industry groups emphasized that the tariffs are essential “to ensure the viability of the domestic steel industry in the face of this massive and growing excess steel capacity.”
“Removing or weakening of these measures before major steel producing countries eliminate their overcapacity — and the subsidies and other trade-distorting policies that have fueled the steel crisis — will only invite a new surge in imports with devastating effects to domestic steel producers and their workers,” the letter continued.
MetalMiner should-cost models: Give your organization levers to pull for more price transparency, from service centers, producers and part suppliers. Explore the models now.