The Section 232 tariffs have the potential to escalate into a trade war, which “doesn’t help economic growth. I’m concerned about the consequences of this protectionist action,” Antti Saarela, manager of market intelligence at Outokumpu Oyj, told attendees at Metal Bulletin’s Sixth International Nickel Conference in Toronto, on Friday June 1.
Because of the tariffs, stainless steel that was intended for shipment to the US has instead been diverted in the European Union, Saarela said. “More imports are expected to land in Europe since they can’t go to the US anymore.”
At the same time, US imports "started to come down quite clearly in the first part of this year,” according to Saarela. This trend has caused European stainless prices to tumble, while US stainless prices have risen.
Indeed, Metal Bulletin’s weekly base price assessment for 2-millimeter, grade 304 cold-rolled stainless steel sheet in northern Europe stands at €1,015-1,050 per tonne (0.54-0.56 cents per lb), down from €1,060-1,130 per tonne on January 5 - the first assessment of the year.
American Metal Market’s latest assessment of Type 304 stainless cold-rolled sheet put it at $1.38 per lb on May 23, up from $1.215 per lb on January 10 - the first assessment of the year.
In an attempt to halt the redirection of steel to the EU market from the US, the European Commission on March 26 launched a safeguard investigation into 26 steel product types.
But despite the import deflection, Saarela said that EU “economic growth seems to be very strong," indicating that the market will be able to absorb additional stainless units.
European demand for stainless steel is projected to increase by 4% in 2018, followed by 3% growth in 2019 and 5% in 2020, according to Saarela. Demand growth rose 3% in 2017 and 2% in 2016. Demand in Europe is “growing much, much faster than in previous years.”
Meanwhile, global demand is expected to rise by 5% in both 2018 and 2019, followed by 2% growth in 2020.
Saarela said that a range of factors are helping to boost stainless demand, including economic and population growth and urbanization. “This is especially true in developing countries where consumption levels are very low. There’s potential for much more consumption going forward."
But one area of concern for the market has been China, which had an overcapacity issue in the beginning of the year due to increased Indonesian production. Although Indonesian material will likely continue to be an issue for China, "the worst seems to be over... Stocks have been coming down for a while and prices are coming up," Saarela said.
Metal Bulletin’s assessment for Chinese domestic grade 304 cold-rolled stainless coil stood at 15,200-15,700 yuan per tonne on May 31, up slightly from 15,200-15,500 yuan per tonne on January 4 - the first assessment of the year.
Recent protectionist actions by the United States could hurt the European stainless market, although global stainless steel demand is expected to see sustained growth in the coming years, according to an industry executive.