Iron and Steel

Hard Days of Steel Industry Continues

Hard Days of Steel Industry Continues
Mining News Pro - Steel industry is having critical situation during the recent months and all the companies are in a shadow of this position. some countries are making new rules for the matter.

According to Mining News Pro - Last Month, MetalMiner reported that stainless steel cost had been holding strong amid high demand and increased production. However, we did identify some cracks in what might otherwise look like a solid recovery. As we transition from Q2 to Q3, some of those cracks have grown significantly.

Low Demand in China Affecting Stainless Steel Cost

According to a recent report from the Shanghai Metals Market, prices are seeing downward pull due to low demand. Though mills are optimistic that Q3 will bring more orders, warrants remain down thus far. As indicated in the report, “In the spot market, the market is uncertain about when the dropping of stainless steel prices will come to an end. Traders mainly hold a pessimistic outlook for the recovery of consumption.”

“Pessimism” seems to be the word of the day when it comes to the Chinese economy and stainless steel cost. President Xi Jinping hasn’t been shy about using his government to spur growth. Even so, reports from organizations like Fortune think the stimulus plan remains too weak to save the ailing economy.

All in all, the company’s strict adherence to zero-COVID initiatives and the crippling lockdowns that result are just big a drag on the economy. Combine this with the worst property market decline on record, and it’s no surprise why steel costs are in danger. In the end, no amount of supply can make up for lack of buyers.

Steel Manufacturers in the EU are Talking Rebound

The European stainless steel market should rebound to close to pre-COVID levels at around 1.2 million mt of finished longs products this year, up from 1.05 million mt in 2021, according to Emilio Giacomazzi, director of sales at Italy’s Cogne Acciai Speciali.

North Italy-based CAS, which has a capacity of over 200,000 mt/year of stainless steel, is one of the main European manufacturers of stainless steel and nickel alloy long products, providing melting, casting, rolling, forging and machining services. The company sold 180.000 mt of stainless longs products in 2021.

“We recorded a jump in demand for stainless steel after the COVID pandemic [although] since May the market has been in a pause as stocks are high and there is also an element of seasonality — but overall demand is good,” Giacomazzi told S&P Global Commodity Insights on June 23.
“Raw materials prices went up, but like most of our competitors we managed to transfer the costs into our final products,” he added, noting that high energy and nickel prices were also partially covered by flexibility in the company’s long-term contracts.

The London Metal Exchange three-month nickel contract hit a high of $48,078/mt on March 7 in the wake of Russia’s invasion of Ukraine, but has since fallen back to $24,449/mt as of June 22, down 15.7% since the start of 2022 although still well above the average of $19,406.38/mt in the second half of 2021.

“We have a very good order intake until Q1 2023 and we see demand continuing to be driven by the automotive sector, even with the new engine regulations, but also from the aerospace, oil and gas, medical and food sectors,” Giacomazzi said.

Merger to close this year

At the end of May, CAS’s board agreed to the sale of a 70% stake in the company to Taiwan-listed industrial conglomerate Walsin Lihwa Corporation. The deal, which is still subject to approval by antitrust authorities, would create the third-largest stainless long producer in the world with a 700,000-800,000 mt/year long stainless steel products capacity.

Giacomazzi said the deal is expected to close this year, and that the companies are currently finalizing documents to be presented to the Italian government.

Giacomazzi also said that the company plans to invest Eur110million on expanding production capacity by at least 50,000 mt/year and on environmental upgrades over the 2022-2024 period, with the additional product likely to be exported to Asian markets.

“China’s demand has slowed down but as COVID lockdown measures ease, we expect a pickup in demand, so we expect that part of the new production will go to Asia,” Giacomazzi said.

“We are also very positive for the US market, in particular for the aerospace and CPI [chemical and processes industry], and we have a strong ambition to further enlarge our operations in North America,” he said.

In the US, Oil and Gas Expansion Could Spur Steel Demand Further

The oil and gas industry remain one of the biggest consumers of stainless steel products. The production of pipes, pumps, tanks, and valves are all dependent on stainless steel. Just last week, Targa Resources signed a multi-billion-dollar deal to purchase operations in the Permian Basin. Lucid Energy previously owned the operation, but Targa committed to dramatically expand its regional presence. If this comes to fruition, the 600,000 acres will necessitate a lot of stainless-steel materials.

Though the public standoff between the Biden administration and oil and gas producers will likely continue, things are a bit different behind the scenes. Recently, industry execs sat down with Energy Secretary Jennifer Granholm in a meeting that both described as “productive.”

According to the American Petroleum Institute, the discussion sends “a positive signal to the market that the US is committed to long-term investment in a strong US refining industry and aligning policies to reflect that commitment.” If true, this could create a space where green energy and traditional energy can peacefully coexist.

When Will the Stainless Steel Rally End?

Many industry insiders have already published reports expecting steel prices to retreat over the coming months. It’s true that global prices, which have skyrocketed since October 2020, seem to have peaked. Supply is back, and demand seems shaky from country to country. Still, only time will tell if (and where) steel prices will find new support.

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