According to Gerber's report on October 1, 2024, due to Indonesia's ongoing nickel ore shortage, China's largest producer is cutting back on its ferronickel output. How will the global raw materials situation for stainless steel develop, and what impact will this have on the fourth quarter of 2024?
1. Tsingshan Reduces Nickel Production in Indonesia
China's largest nickel producer, Tsingshan, has reduced its output in Indonesia due to ongoing ore shortages caused by delays in mining quota approvals.
2. Scarce Ore Supply Increases Production Costs
The shortage caused by slow licensing has increased production costs, forcing Indonesian smelters to import ore from the Philippines, the world's second-largest nickel producer. Within a year, the amount of imported iron ore from the Philippines has increased nearly tenfold.
Tsingshan, which operates in Indonesia's Morowali and Weda Bay industrial parks, has not disclosed the specific extent of the production cuts.
3. Indonesian Ore Prices Rise by 45%
The limited supply of Indonesian ore has driven prices up by more than 45% since the end of 2023. During the same period, Philippine ore prices have risen by nearly 30%. Indonesian NPI (nickel pig iron, with a nickel content of 10-16%) prices have increased by over 8.4%.
4. Optimistic Outlook for Stainless Steel in Q4 2024
Even though some media outlets and associations continue to downplay the sentiment in the European steel and stainless steel markets—especially when surveys may paint a skewed picture due to limited information about their structure—the situation may not be as bad as it seems. Is this another case of large steel companies sacrificing the interests of small and medium-sized domestic businesses to seek new subsidies?
5. Stainless Steel Raw Materials Situation
Scrap and stainless steel scrap are in short supply not only in Europe but also worldwide. In the EU alone, since 2021, the shortage of stainless steel scrap may reach a record high of 2 million tons, as EU manufacturers have increased the proportion of scrap and recycled materials in their electric arc furnaces to over 90%. This is partly due to the high prices of stainless steel scrap, but also due to increased imports of ferronickel and stainless steel slabs into the EU.
6. Scrap Becoming More Popular
Regarding scrap steel, carbon steel manufacturers have recently voiced concerns that the increasing shift toward electric arc furnaces may lead to shortages in other types of scrap steel. Southern Europe has also renewed its call to ban scrap exports.
7. Ore Shortfall Greater Than Expected
As mentioned earlier, Tsingshan has announced a reduction in ferronickel production due to the nickel ore shortage. The high price of Indonesian nickel ore has pushed up the cost of NPI production, as well as the costs for stainless steel manufacturers across Asia.
Overall, producers have indicated in recent weeks and months that they are not willing to sell products below production costs. They prefer to shut down plants, including closing AOD furnaces or RKEF plants.
Since early September 2024, nickel prices have been on an upward trend for several weeks. Prices on the London Metal Exchange have risen by over 8%, currently nearing $17,800 per ton.
If production capacity is limited, considering the demand from Western stainless steel manufacturers, economic regions such as the EU can only meet their stainless steel needs through imports. This often leads to price stability for stainless steel and potential room for price increases.
Overall, this suggests that the price trend in the coming months is generally favorable.
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