Scrap demand is likely to increase in Sep-Nov period as mills want to recover losses incurred during lockdown months and stock up inventories until December, which is followed by a seasonal lull period. Pent up demand for SS is playing its fair role in the market and the festive season is likely to boost demand for SS end products. Scrap demand is expected to move upwards from the current stable demand until December.
Market participants speculate that market may fall after December and pick up post-March next year as Dec-Feb is a holiday season and the Chinese New Year begins which will push demand lower and pull prices down.
Consumption
Consumption is ‘limping’ back and there is good movement in the market on the back of improved production capacities at Indian mills. Recovery is better now for scrap as August was a good month in terms of demand as reflected by prices rallying. Migrant labourers are returning, supply chains are healing. Indian buyers are in a quest to procure cheaper and good quality material as prices are rising which is also an indicator of strong demand. Banks, traders, producers are all in a phase where they are trying to reclaim the opportunity losses borne in the past five months due to COVID-19. This is escalating growth in the industry and mending the economy slowly.
Nickel prices
Scrap prices in September third week were too high and most mills are opting to wait for prices to fall as they have enough inventories stocked already. Nickel prices were projected to rise and therefore mills booked healthy quantities of scrap to secure their margins. Prices are very high entering September which resulted in squeezed margins for stainless steel mills and as a result many companies cut down consumption of raw materials until prices become feasible.
The Davis Index for ss 304 (18-8) solids on Tuesday settled at $1,313/mt cfr India port and the index for Taiwan settled at $1,270/mt cfr Taiwan port. Prices are expected to move up in both India and Taiwan according to some traders.
Prices of ss 316 solids were on an uptrend since end of July when Davis Index settled at $1,791/mt cfr India port and until Sep 15 grew upto $1,900/mt cfr India port which is almost 10pc up in a period of approximately 2 months. On Sep 22, prices fell to $1,846/mt cfr India port. LME Nickel is also on a downtrend which can influence scrap prices to decline. In a month, LME nickel official three-month contract is down almost $500/mt and settled at $14,414/mt on Sep 23.
LME nickel seasonally declines in December which will result in lower scrap rates but the market would witness a lull period and would only begin its climb post-February. In the Dec-Jan period, Viraj Profile’s activities are low to almost closed, this directly pressures scrap demand in India.
Capacity expansion
Indian mills are expanding capacities and domestic market is reaching to a self-sustainable stage, shares traders. It might also be possible that mills would continue production even in the seasonal lull period as almost a quarter of production was lost due to COVID-19 lockdowns.
Several Chinese companies have chosen to not shut down their production for maintenance and care period in September. Mills continued production to make up for losses faced in the beginning of the year and to meet pent-up market demand.
Prices of stainless-steel scrap remain supported by high demand from Far East nations. The Taiwanese market is ripe for stainless steel and so are South Korean markets. Economies in the Far East are reviving. Taiwan and South Korea are main consumers of 304 ad 316 series while India’s consumption is far less compared to them.