EU duties on stainless steel imports would support alloy prices, producers, analyst says

Any imposition by Europe of import duties on stainless steel products from Indonesia and India would spur the domestic market, create additional demand for alloy and boost the ferro-chrome market - but the effects on prices may only be short-lived, according to Fastmarkets’ senior analyst.

It has been expected for some time that the EU will impose import duties on Indonesian and Indian stainless steel in the near future.

As a consequence, domestic European producers of stainless steel have reported increased demand for their material in a market that is very strong.

“This is good news, and we can see already the reaction. We have already taken stainless steel orders [to keep us busy] until January 2022,” one stainless-steel producer said. “The [European] anti-dumping legislation means that we expect to be operating at full capacity for the rest of this year. [Import duties would] support prices into 2022, at least.”

Additional strength in Europe’s stainless-steel sector would drive demand for feedstock materials, such as high-carbon ferro-chrome.

“Combined imports from India and Indonesia had grown to account for 20-25% of the EU’s entire imports of cold-rolled flat stainless steel recently, up from about 10-15% a few years ago. That’s a fair bit of supply to lock out of the market,” Robert Cartman, Fastmarkets’ senior analyst, said on Monday May 24.

“In turn,” he added, “this would help to boost demand for ferro-chrome from Europe’s stainless steel makers when they capture market share from imports.”

This could be expected to increase demand for ferro-chrome in Europe, according to ferro-chrome producers.

“This will support our ferro-chrome business until the end of the year, we hope,” a ferro-chrome producer said. “That is, assuming the stainless-steel guys do not increase European stainless-steel prices so high that it makes sense for Indian or Indonesian [suppliers] to pay the duty and start importing.”

Prices for high-carbon ferro-chrome have been on an upward trend with the market recovering from the worst effects of the Covid-19 pandemic in 2020.

Fastmarkets’ latest price assessment for ferro-chrome, high carbon, 6-8.5% C, basis 65-70% Cr, max 1.5% Si, delivered Europe, was $1.20-1.50 per lb Cr on May 18.

The price assessment for the European ferro-chrome market has held up despite weakness in the Chinese market, which would usually be expected to drive up prices in Europe.

Prices were expected to remain strong in response to buying appetite from Europe’s stainless-steel sector, which flourished over the first quarter of 2021.

“EU ferro-chrome prices might outperform for a while, given growing demand from stainless [steel] producers there,” Cartman said.

Indian ferro-chrome producers could increase their exports if their domestic market were to be damped by EU duties. But the implications of such duties on the Indian ferro-chrome market could be muddied by the consequences of the current spike in the numbers of Covid-19 cases in the country.

“We could see a big effect on Indian ferro-chrome production because of the pandemic. I am sure that we have already seen the highest ferro-chrome prices in Europe for this year,” a ferro-chrome trader said. “But what [would happen] if Indian ferro-chrome producers [were forced] to stop production because of the coronavirus situation?”

Indian ferro-chrome falls within Fastmarkets’ weekly price assessment for ferro-chrome, high carbon, 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe, which was stable at $0.98-1.08 per lb Cr for a second week on May 18.

Following a change in EU duties, some of the stainless steel that would have come from India and Indonesia could be replaced by imports from such sources as Taiwan, South Korea, Turkey, Vietnam and Malaysia.

But such sites have higher production costs and operate on a smaller scale, and are often focused more on their local markets, so the effects would be muted, Cartman said.

“Ultimately, China is still the bigger market and developments there affect the market in the EU,” he said.

“If ferro-chrome demand growth slows in China, as it appears to be doing at present, that has a knock-on effect with regard to availability of material for EU customers,” he added. “I wouldn’t be surprised to see European prices stagnate soon, or pull back.”

The result of reduced low-cost stainless-steel competition against Europe’s producers would be a stronger domestic stainless-steel industry, and this would attract increased imports of alloy, according to a producer.

“We may see more ferro-chrome flowing into Europe over time, but I don’t expect it to have a great effect on prices,” a second ferro-chrome producer said. “I expect we will see higher capacity utilization.”

Low-carbon ferro-chrome activity
Meanwhile, China has increased the tax imposed on exports of ferro-chrome among a raft of changes designed to increase the country’s imports of steelmaking raw materials, the Chinese ministry of finance said on April 27.

“China has increased its export tax on ferro-chrome to 20% from 15%. This measure has the most significant effect on low-carbon ferro-chrome, because it is the ferro-chrome grade that China exports the most,” a ferro-chrome producer said. “We have already heard that Chinese low-carbon ferro-chrome [with Cr content of 60%] is now being offered to Europe at higher prices.”

Fastmarkets’ latest price assessment for ferro-chrome, 0.10% C, average 65-70% Cr, delivered Europe, was $1.92-2.36 per lb Cr on May 11.

The market has been steadily recovering since the multi-year lows set in the fourth quarter of 2020, although Cartman doubted whether the volumes of Chinese exports affected by the tax changes would be sufficient to have a meaningful effect on prices in Europe.

Click here to view the latest Stainless Steels tracker in full published by Fastmarkets’ research team, including Robert Cartman.

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