EU stainless steel buyers concerned about tight supply

Scarcity of material and high prices will remain key features of the European stainless steel market, in the last few months of 2021. The pandemic-induced supply/demand imbalance continues to disrupt global supply chains.

Manufacturing companies worldwide are still battling with shortages of materials and components. The most publicised effect is the reduction in vehicle output, resulting from the semiconductor shortfall. However, this is just one of the many bottlenecks.

In Europe, availability of stainless steel, from domestic producers, remains tight. Steelmakers have been unable to supply sufficient tonnages to service centres and distributors, since the rapid upturn in demand, in late 2020. This was, initially, most notable in flat product categories, due to the strong rebound in the requirements of the automotive and white goods industries.

Delivery lead times vary between mills, but are generally in the range between January and April, next year, for 300 series stainless steel coils. This is a far cry from the four-week dispatch dates to which many buyers were accustomed, pre-Covid. The delivery lead times being offered by regional bar mills are even longer, extending to May/June 2022.

Mixed uptake for Q4 quotas

The EC safeguard measures have regulated the volume of overseas material arriving in the EU, since 2018. Despite growing opposition to the quotas and the low supply chain inventories across Europe, the safeguards were extended for a further three years, to cover the period July 1, 2021 until June 30, 2024. Consequently, mills in many countries remain reluctant to ship to European customers. Local stainless steel buyers are, therefore, offered little reprieve from the domestic shortfall.

During the initial few days of the October/December period, the entire tariff-free quotas, for several country specific product categories, were customs cleared at European ports. These included stainless cold rolled flat products, from Taiwan and Turkey, plus Indian-produced stainless bars and light sections.

Conversely, the volumes arriving from several other nations, for these products, are unlikely to be fully utilised, at the current rate, before the end of December. Mills in a number of these countries – most notably those in China, South Korea, Malaysia and Indonesia – are expected to prioritise sales to their local markets, rather than exports.

Much of the Taiwanese and Turkish cold rolled flat products, along with the Indian-origin stainless bars and light sections, had arrived weeks or possibly months earlier. This material was held in storage at the docks, awaiting the quota renewal, to avoid the tariff.

Several buyers suggested that the tonnages waiting customs clearance exceeded the duty-free allowances at the beginning of October. Therefore, it is likely that the first quarter quotas for these categories will be exhausted quickly at the start of 2022.

Mills remain bullish on prices

The current volume of imports is of little concern to domestic stainless steel producers. The recent fire at Marcegaglia’s plant is likely to further tighten the supply of cold rolled coil, especially in southern Europe, in the near term.

Buyers confirm that local mills remain bullish in their pricing aspirations. They are, reportedly, reluctant to reduce selling values because they have extended order books. Furthermore, the rising cost of energy and raw materials is expected to exert additional upward pressure on stainless steel transaction values, in the final two months of 2021.

However, a sustained slowdown in purchasing activity may result in an increasing number of customers beginning to resist further price increases, during this period.