·
Demand
slows sharply:
European stainless steel demand weakened significantly
in June, ending the strong momentum seen during
April and early June.
·
Market
outlook subdued: Most
market participants expect weaker
demand over
the coming months.
·
CBAM
and safeguards boosted orders:
Earlier in the second quarter, the Carbon
Border Adjustment Mechanism (CBAM)
and EU
safeguard measures
supported European mills by reducing import competition and increasing order
intake.
·
Import
penetration reduced:
Imports into the European stainless steel market were cut
by around 50%,
reflecting the effectiveness of the trade protection measures.
·
Restocking
rather than real demand: Much
of the earlier increase in orders now appears to have been driven by inventory restocking, rather than stronger end-user
consumption.
·
Inventory
absorption remains uncertain:
The coming months will indicate whether underlying market demand is sufficient
to absorb accumulated inventories.
·
Oil
and gas projects remain delayed:
Although tensions around the Strait
of Hormuz have
eased, many large oil and gas projects continue to be delayed or remain on
hold, limiting stainless steel demand.
·
Slab
imports increase:
Significant volumes of stainless steel slabs have recently entered Europe and are
being processed mainly by two major flat stainless steel
producers.
·
CBAM
applies to slab imports:
Imported stainless steel slabs, including those from Indonesia, remain subject to CBAM requirements.
·
Seasonal
low for scrap demand:
Demand for stainless
steel scrap is
expected to reach its lowest level of the year during the summer due to:
o Holiday shutdowns.
o Planned maintenance outages.
o Higher slab imports.
o Weakening order books.
·
Raw
material prices decline:
o Carbon steel scrap prices have softened.
o LME nickel prices have fallen by more than US$2,500 per tonne.
o Prices for standard grades of stainless steel scrap have consequently declined.
·
Overall
market sentiment: The
European stainless steel market is entering a period
of weaker
demand, lower raw material prices, subdued industrial activity and seasonal
softness,
following a temporary boost from trade protection measures.
General
demand momentum slowed significantly for European stainless steel producers during
June. The strong market dynamics observed throughout April and into the beginning
of June have faded, and most market participants are now anticipating a more subdued
demand environment for the coming months.
During
the early part of the second quarter, both the Carbon Border Adjustment Mechanism
(CBAM) and the EU safeguard measures, which are designed to protect the European
market from the adverse effects of global overcapacity and unfair competition, provided
strong support to order intake at European stainless steel
mills. As a result, import penetration was effectively cut in half during this period.
It now appears that part of this demand was driven by restocking rather than genuine
end-user consumption. The coming months will reveal to what extent underlying demand
is able to absorb these inventories.
In
addition, tensions surrounding the Strait of Hormuz have eased somewhat. Nevertheless,
many large-scale projects, particularly in the oil and gas sector, remain delayed
or on hold. Consequently, overall demand for stainless steel products has not improved
materially.
Another
notable development is that substantial volumes of stainless steel
slabs have recently arrived in Europe and are being processed primarily by two leading
flat stainless steel producers. It should be remembered
that imported stainless steel slabs, including those originating from Indonesia,
are subject to CBAM.
Against
this backdrop, stainless steel scrap demand is expected to reach its seasonal low
during the summer months. Holiday shutdowns, planned maintenance outages, increased
slab imports and weaker order intake are all contributing to what is likely to be
the lowest level of stainless scrap demand this year. At the same time, carbon steel
scrap prices have softened, while the LME nickel price has fallen by more than US$
2500 per tonne. Prices for standard grades of stainless steel
scrap have also declined as a consequence.