Lower feedstock prices needed in Europe: Outokumpu

Europe's largest stainless steel producer Outokumpu is calling for lower feedstock prices amid intense competition from Asian mills.

"This is a message to our suppliers that we need better discounts [in stainless steel scrap and ferro-nickel] to compete with our Asian competitors," Finnish firm Outokumpu market intelligence manager Antti Saarela told delegates at the Argus NiCoMo conference in London last week.

Unlike Chinese and Indonesian stainless steelmakers, producers in Europe rely mostly on 304 series stainless steel scrap (containing 8pc nickel content), followed by ferro-nickel as the main feedstock. European mills then use refined nickel to ensure the level of nickel content is met in different alloys.

According to market participants, stainless steel scrap accounted for up to 80pc of European stainless steelmakers' feedstock.

Outokumpu said that the prices of stainless steel scrap and ferro-nickel in Europe are too high when compared with nickel pig iron (NPI), which is the main feedstock for Asian stainless steel mills.

According to Outokumpu, NPI was priced at 50pc of the LME nickel contract in September 2017. The discount to the LME price had widened to 60pc in June 2017 before narrowing to close to 40pc at the end of 2018. NPI's discount to the LME nickel price was at around 45pc in January.

Meanwhile, the discounts to LME nickel prices on 304 series stainless steel scrap in Europe was at 30pc in January and ferro-nickel prices are just a few percent below the LME contract.

Stainless steel scrap discounts to LME nickel prices started to widen in July 2016, Outokumpu data show.

Discounts are reported to have been as wide as 35pc in some parts of Europe since late 2018 and traders said this was the widest for some years.

Argus 304 stainless steel scrap prices were last assessed at €1,030-1,060/t on a cif Rotterdam basis on 28 February.

In addition to low NPI prices, "there is also unfair state subsidy that is supporting the Chinese stainless steel industry. Unlike Europe, companies in Asia don't have to pay for their carbon emission," Saarela said.

Integrated Chinese-owned stainless steelmaker Tsingshan Holding Group set up a 3mn t/year mill in Indonesia and production started in 2017. Tsingshan Indonesia also operates its NPI and chrome mining, which enables the steelmaker to benefit from low-cost production.

Outokumpu's global shipments reached 2.43mn t in 2018, down by 0.8c from 2.45mn t in 2017.