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August 4, 2021 – Chinese stainless steel prices are currently fluctuating at a high level and this is expected to continue not only in China but also worldwide. There are increasing reports that the crisis in the automotive industry, triggered by a shortage of semi-conductor chips, could soon come to an end. And will the end of EU-US tariffs on steel come as early as November 1, 2021? Can there be a solution when both sides have already made it clear that they want to protect their steel producers at all costs?

Stainless Espresso: Stainless steel prices fluctuate at a high level
Stainless Espresso: Stainless steel prices fluctuate at a high level

Stainless steel prices fluctuate at a high level

In July 2021, stainless steel futures in China increased by more than 18% month-on-month. Spot prices also increased by more than 17.5% by the end of July.

High demand and scarce supply

The background to these increases were price rises for raw materials such as nickel pig iron and ferrochrome, whose scarcity on the market was fueled by energy shortages in China. In addition, there was and still is very high demand for stainless steel products and the raw materials required for them on the global market. The spot markets have been virtually empty.

After reaching a new high on August 2, stainless steel futures have now fallen slightly.

Chinese stainless steel mills unable to keep up with demand

Stainless steel is also still in short supply on the market. Even though the Chinese mills are running at full speed, they cannot keep up with demand and currently have to service huge backlogs. And stainless steel inventories in China have now fallen to their lowest level since 2020.

Chinese logistics restricted

Furthermore, the Chinese government has closed the access to the expressways in several provinces to prevent a renewed spread of the corona pandemic.

It is a global stainless steel issue

We are currently seeing this issue not only in China but also on a global level. Stainless steel is and will remain a highly sought-after commodity at least until well into 2022. Stainless steel prices will therefore in all probability remain high not only in China in August, but will fluctuate at a high level worldwide.

Is the flood of semi-conductor chips coming?

Already yesterday we speculated that the chip shortage in the automotive industry could soon come to an end. Then today we read that efforts to get a handle on the chip shortage are on the possible path to triggering a massive overcapacity.

That would, in one fell swoop, solve the carmakers’ problems and put them back in the running as a major consumer and buyer of steel products. This is likely to have a lasting impact on availability.

Will the EU and US resolve their dispute over steel tariffs as early as November 1, 2021?

There is already increasing talk in the media that the European Union and the United States intend to resolve their trade dispute regarding mutual tariffs on steel products by November 1, 2021. Almost two months earlier than originally planned.

Tariff dispute: both sides are showing lines they are not willing to cross

But already, both sides are showing lines they are not willing to cross. Which doesn’t exactly make a solution to the dispute over the US Section 232 tariffs and the EU’s counter tariffs any easier. Because in the end, a solution must also comply with WTO regulations.

EU and U.S. want to protect their domestic steel producers at all costs

In any case, great caution is called for by the US and the EU. If one of them moves too much or too little, this could lead to a very unfavorable outcome for the other negotiating partner.

However, one thing is already certain: both sides want to protect their domestic steel producers at all costs.

In a recent Focus EU-US article we take a closer look at the overall situation.

FOCUS EU-US: Settlement of the steel tariff dispute by November 1, 2021?
FOCUS EU-US: Settlement of the steel tariff dispute by November 1, 2021?

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