Tight EU stainless supply drives switch to imports

Some European buyers are increasing imports of finished stainless steel from countries such as Taiwan and Turkey owing to a favourable price spread relative to European supplies, rising lead times from domestic mills and delays to existing orders, market participants told Argus this week.

Orders are being placed with companies exempted from EU SSCR duties as part of the EU's recent anti-circumvention investigation, with Taiwan heard to be the favoured source given that most of the country's producers were excluded from countervailing duties.

Supply across Europe has tightened following extended strike action at Spanish producer Acerinox and a wider industrial walkout in Finland, which has affected operations at major producer Outokumpu. Indefinite strikes at Acerinox have exceeded two months, with the latest round of talks between the company and the strike committee held on 27 March failing to end the impasse.

The loss of production at Acerinox and Outokumpu has squeezed capacity at other large mills in Europe. Mills across the region are now quoting a delivery time of June for new production orders, two traders told Argus today. Many distributors are unperturbed given weak downstream demand and have sufficient available stocks, but other buyers are moving to secure supply from Asia owing to concerns that the current disruption will not ease quickly. "We are seeing a lot of volume being booked from Taiwan," a trader said.

Alongside the supply problems, another factor driving an increase in imports is lower achievable prices. Stainless steel import prices from Asia are €100-200/t lower than from Europe after European mills hiked offers for April, market participants said. Service centres are finding imports more attractive as a result, given that they have not been able to pass on domestic price increases to their customers.

"Service centre margins are very low," a second trader said. "Mills are asking them to pay more, but their [service centres'] customers will not pay any more."

The newly launched Argus monthly assessment for stainless steel 304 cold rolled 2mm sheet delivered northwest Europe rose to €2,650-2,700/t in April, up from a shadow assessment of €2,600-2,650/t in March. The corresponding 316 assessment rose to €4,150-4,250/t in April, up from March's €3,900-4,200/t.

The threat from imports is still relatively limited, with participants insisting that much of the market has access to sufficient material domestically to ride out the supply tightness. But further delays to delivery times could change the trend significantly in favour of imports, especially as import quotas from Taiwan and Turkey have been under-utilised this year owing to the EU's anti-circumvention investigation. Interest in imports has surfaced even though the investigation's results are provisional and a final European Commission report is only expected in May, indicating that some buyers are in a rush to cover second and third-quarter requirements.

Acerinox is considering a total shutdown of its plants, market participants said, after the outbreak of a fire at its facility in Los Barrios, Cadiz, last week, which the company said was caused intentionally by striking workers. Acerinox has also faced worker disruption in the carrying out of minimum operational tasks at its plant. A wide array of labour demands are at the centre of the dispute, including flexibility of working days, availability during breaks, salaries and promotions. A further round of negotiations between the sides is expected on 10 April, with workers due to demonstrate at the headquarters of the Andalusian parliament on 11 April.

Industrial action in Finland ended this week, but market participants expect only a gradual return to normal production at Outokumpu given the impact of the month-long strike on the transport of raw materials in and out of the country, along with delays to maintenance of machinery and equipment.

Rising import pressure has started to be reflected in some domestic mill offers in Germany, France and Italy, with sales quotes heard at the €2,600-2,650/t range over the past week, a trader said. But unless there is a significant rise in nickel prices, imported stainless steel prices will continue to compare favourably. Under these fundamentals, the outlook for service centre demand is likely to determine import volumes during April-June.

By Raghav Jain