“Alloy surcharges down for May 2021!” It always sounds nice when the press writes that prices are going down somewhere. But if you know the market for stainless steel, you know that at present such reductions in alloy surcharges can only be theoretical. And if at all, they have only a marginal influence on real stainless steel prices and availability.
Most important question among purchasers: Where can I get stainless steel?
Because neither in the European Union nor in the United States are domestic steel producers currently able to meet demand. That’s why alloy surcharges can be lowered. Nothing can be expected from European and US stainless steel mills in May 2021.
China cancels export rebates for 146 steel and stainless steel products
If the shortages in the steel and stainless steel market were not difficult enough, the Chinese government will cancel export rebates on 146 steel products on April 28, 2021. As a result, steel from China will become 13% more expensive starting May 1. And if you look at the products affected; all the major stainless steel commodities are among them.
United States still talking about steel overcapacity
As recently as April 28, USTR Tai turns to the EU and says that any tariff deal with the European Union would have to target global overcapacity in metals – especially in China (Source).
This raises the question for steel consumers (aluminum is no different):
What steel excess capacities, please?
The Chinese concentration on the domestic market is taking millions of tons of steel and stainless steel out of availability. In addition, production is being cut in more and more Chinese provinces. Soon, those who are always calling for “excess capacities” will have to look for a new bogeyman.
On the contrary, domestic manufacturers in the USA and the EU will have a problem with idle capacity. Especially with regard to the availability of slabs. At OECD member Mexico, more than 6 million tons of rolling capacity are just coming on stream (Source). Where are the slabs going to come from?
And the United States is already thinking about reducing Brazilian steel quotas (Source). It is always problematic to work with figures from the past that no longer correspond in any way to current reality. In fact, even here China has wiped away the accusation that was being made against Brazil in one fell swoop. Buying material cheaply abroad and selling it on the domestic market. And to sell its own production expensively to the USA. This is unlikely to come to pass.
Steel prices up more than 130% since May 2020
It is not only steel prices (HRC) that have had an indescribable rally since last year, rising by more than 130%. Alloy surcharges, despite all the minor downward corrections, have also risen since December 2020 by up to 45% in some cases in Europe and by more than 100% in some cases in the United States.
This increase in prices in less than a year, makes the current situation more than clear for the steel buyer and steel consumer. He has no choice but to accept the current price. His biggest problem is to get any material at all. There is just few material available. And the Western industrialized nations are allowing themselves to be instrumentalized by their steel producers and are increasingly closing the markets. The fact that the domestic downstream industries are being destroyed in the process does not seem to be taken into consideration. The main thing is to keep the steel flowing! But only domestic steel, please.
A theoretical outlook on the alloy surcharges
Nickel futures in upward trend – increase of approx. 10% in April
After being stuck at $16,000 per ton on the LME for a long time in April, nickel is currently (April 30, 2021) back above $17,600 per ton. Nickel futures are also doing very well on the SHFE with prices around $19,500 per ton.
The current positive macroeconomic environment is said to have led to the increase in nickel prices, according to analysts’ opinions.
However, these increases in the nickel price have not yet been reflected in the current alloy surcharges for May 2021.
Ferro molybdenum price softens in April
Since mid-April, the molybdenum price has dropped about 7% and currently (April 30, 2021) stands at about $27,000 per ton (Source). A bit of the drop in ferro molybdenum price can be seen in the alloy surcharges for May.
Ferro chrome prices down, but chrome surcharges significantly up
Chinese ferrochrome prices have fallen by almost 13% since the beginning of April, after rising sharply in March due to production cuts in Inner Mongolia.
However, in Europe and the United States, not much of the new prices have yet arrived. In Europe, alloy surcharges in the chrome-containing 400 series have changed only marginally.
In the United States, on the other hand, alloy surcharges increased by over 24% from April to May. And in some cases have even increased by over 100% since December 2020.
The Chinese government has announced that it will raise export taxes by 5% points for ferrochrome starting May 1. In order to keep important raw materials for steel production in the country. This could again reduce the availability of ferrochrome ores on the world market and cause prices to rise again. (Source)
Scrap: Stainless steel scrap still in very short supply
Scrap has been the focus of stainless steel producers for months. Its availability is limited. Prices are high. Even though there are repeated attempts to push the price down, demand is unbroken. And it will continue to rise.
With its latest announcements, China has ensured that import duties on scrap will be lifted. This makes it more interesting for Chinese manufacturers to import scrap. And will take capacity off the market.
The EU is already trying to keep domestic scrap in the country but seems to want to resort to trickery. And they are desperately trying to avoid the word export ban and to make it more attractive to the WTO and the world community.
Steel scrap thus retains a weighty share in the alloy surcharges.
Foreign exchange: Dollar continues to weaken against the euro
After the dollar at the beginning of April still stood with approx. 0,85 $ to 1 EUR, it fell over the April slowly again to 0,824 $. And has the past few days by one U.S. cent again weakened and currently stands (April 30, 2021) at about $ 0.827 to 1 EUR.
The economic outlook for the United States currently looks good. The economy is already recovering from the pandemic. And the Federal Reserve is leaving rates near zero and continuing to buy bonds. However, the current inflation of over 2% (currently 2.6%) makes US monetary officials a little worried (Source).
Ferro vanadium currently shows indecision
April 2021 saw a slight decline in European vanadium pentoxide prices, but an increase in ferrovanadium prices in China (Source).
Vanadium has also become interesting for battery manufacturers for some time. Which has led to an increase in prices since December 2020.
Iron ores: prices under clear upward pressure
The rise in iron ore prices has accompanied us throughout April. High demand from China and the rest of the world, coupled with supply problems at the largest iron ore producers, have pushed prices for domestic iron ore in China to over $200 in some cases.
Analysts believe iron ore could continue its rally toward $200 per ton otherwise. Already since January 2021, iron ore prices have risen by about 21% to 22%.
Iron ores actually have little influence on alloy surcharges. But they do have an impact on the base price.
Ferro manganese remained relatively stable
After falling at the end of March 2021, manganese ore prices have recovered somewhat, rising by about 2.6%. However, a real trend reversal cannot yet be seen.
Alloy surcharges: Outlook for the coming months
With the cancellation of the Chinese export rebates, the stainless steel world has once again changed rapidly. From one day to the next we are faced with a completely new situation. What will happen in the People’s Republic after the Chinese Labor Days from May 1 to 6, 2021, nobody knows right now. The Asian world is holding its breath and waiting to see how prices will develop. Some sources have already told us that Chinese steel prices could rise by $250 per ton.
Therefore, this is only a theoretical outlook on the alloy surcharges for May and June. As soon as there is something new regarding the alloy surcharges, we will of course inform you. And be sure to keep an eye out for our Stainless Espresso.
EU under massive pressure
In any case, the EU and the USA are under massive pressure. The Safeguard measures in the European Union expire at the end of June. And it has not yet been decided what will happen afterwards. Further decisions regarding anti-dumping measures in the EU are also still open.
Europe loses important competitive advantages through market protection measures
If the European Commission finally announces the end of the EU Safeguard measures, this would take a massive burden off many steel consumers. And secure important competitive advantages and preserve millions of jobs.
EU Green Deal and CBAM: Prices for steel still rising?
Because with the EU Green Deal and CBAM, new measures are already in the pipeline that could make steel up to 100% more expensive, according to EU mills. And the United States is also already taking a clear stance on the issue of carbon neutrality. But China is currently running ahead of both countries.
Do you need support? We are here for you!
But that’s all still a few days away. Right now, we need to secure your supply of stainless steel. Why don’t you give us a call? EU +49 7642 9282851 or US +1 302 803 5865 and we will be happy to help you solve your purchasing challenges.
- Alloy surcharges April 2021: Strong increase in surcharges
- Alloy surcharges March 2021: Rapidly rising raw material prices and shortages set the trend
- Alloy surcharges: Where is the rally on the metal markets heading?
We at the Gerber Group have been trading in stainless steel worldwide for over 20 years. We are your experts when it comes to purchasing, import, logistics and services. Information is a vital part of this. Because only then can you and we make the right decisions. Do you have any questions? Contact us now.
Disclaimer: Many things here represent our opinion. Others are information from the Internet. We can therefore never claim to be correct or complete. And never base a business decision solely on the news you receive from us.