Megatrends drive the demand for sustainable solutions
Global megatrends – such as urbanization, mobility, economic and population growth, and climate change – are the main growth drivers for the stainless steel industry. The need to develop sustainable solutions that are durable and can be reused at the end of their lifecycle is apparent, as the megatrends drive the demand for economic, social, and environmental sustainability.
Our commitment and contribution to sustainability are embedded throughout our value chain from procurement and production to customer deliveries. We have the lowest carbon footprint in our industry, and we are the leader in the circular economy as the recycled content in our stainless steel is the highest in the industry – at over 90%. Mitigating climate change by reducing our carbon footprint is a clear focus area, and we aim to reduce our environmental impact through, for example, energy efficient production and by using low-carbon electricity. We are continuously looking for ways to improve the sustainability of our products and processes even further.
Stainless steel is sold either directly to end users or to stainless steel distributors, tube makers, and processors, such as steel service centers, who resell the products to end users. In 2021, 56% of our business area Europe’s stainless steel flat product quantities was sold directly to end-user customers. The remaining approximately 44% were delivered to distributors that stock and process stainless steel to serve end users. In the Americas business area, distributors have a higher share of two-thirds of the total quantities.
Global market with few big players
Outokumpu operates in the global stainless steel market. Our world-class assets, comprehensive product portfolio and proven expertise form a sound foundation for our strategy execution and future success. In 2021, the market for cold-rolled flat products totaled approximately 30.3 million tonnes. (Source: CRU) Outokumpu’s global market share was approximately 5.5%. (Source: CRU and Outokumpu estimates) Outokumpu is the market leader in Europe, given our cold-rolled market share of approximately 29%. (Source: EUROFER) In the USMCA region, our market share stands at 24%, making Outokumpu the clear number two in the Americas. (Sources: American Iron & Steel Institute, StatsCan, Canacero) Focusing on the US market, Outokumpu’s share amounts to around 22%. (Sources: American Iron & Steel Institute)
The stainless steel industry has been burdened by overcapacity in recent years, especially in Asia. In addition to Outokumpu, the largest stainless steel producers worldwide include Asian companies Tsingshan, Delong, Baosteel*, TISCO* and POSCO as well as European-based Acerinox and Aperam. The global stainless steel production capacity of slabs increased in 2021 by roughly 3% to 59.6 million tonnes. To adjust to changing trade restrictions within Asia and Europe, both Tsingshan and Delong have shown flexibility in switching from slab to billet production and vice versa. The global utilization rate was assessed to have increased to around 80% in 2021, up from 72% in 2020 induced by the recovery from the COVID-19 lows. As the production of stainless steel is capital intensive, producers generally aim for continuously high capacity utilization in order to maintain and improve profitability. (Source: CRU.) Several Asian producers also manufacture carbon steel, which can be a substitute product for stainless in some cases, while European stainless steel manufacturers focus on the production of sustainable material. (Source: CRU)
Strong market environment in 2021
Global consumption of stainless steel has recovered strongly throughout 2021, supported by successful vaccination programs and supportive fiscal and monetary policy. Due to robust private consumption and high demand for durable goods, segments like Appliances and Automotive have benefited from high underlying demand. Further end-use segments like Construction & Architecture or Heavy Industry, which suffered from a sharp decline in demand during COVID-19, have performed well this year. The production of stainless steel producers has increased year-on-year to meet the high demand, but extremely strong order books have anyhow still caused lead times to increase to multi-year highs. Moreover, reported distributor inventories were also below historical averages. Long lead times from Asian producers, logistical bottlenecks and high freight costs have added to the constrained supply situation and caused customers to prefer regionalized sourcing.
Especially in Europe, imports from third countries were limited particularly in the first half of 2021 by the above-mentioned external factors, like surging freight costs, container shortages and high domestic demand in third countries. However, in 2021, there were still no signs of easing market distortions in some stainless steel producing countries outside the EU. As a result, and to mitigate from these distortions like dumping, state subsidies or weaker sustainability performance, the EU has taken some important steps in the process of creating a fair competitive environment between the European and third country producers.
First, in May, the EU found Indonesia and India had been selling cold-rolled stainless steel products to the EU market at dumped prices and consequently imposed provisional anti-dumping duties on these countries, which were made definitive for five years later in November. The decision by the EU in June to renew the steel safeguard measures for another three years was also very well justified, as the abundant overcapacities in Asia and the US Section 232 tariffs remain unchanged after three years when the safeguards were originally imposed. Also, in September the EU published the decision to renew the current anti-dumping duties on cold rolled from China and Taiwan at the existing levels for another five years, until September 2026. Outokumpu welcomes these actions as steps in the right direction but still insists for more assertive application of the EU’s trade defense measures at their full potential to level the playing field in order to achieve a fair competitive environment between the European and third country producers.
In February 2021, the EU also initiated an investigation into the alleged subsidies by the governments of Indonesia and India, when exporting stainless steel cold-rolled products to the EU market. In this proceeding the EU will have a chance to impose definitive anti-subsidy duties on these countries by March 2022. Among the ongoing trade proceedings, Outokumpu is also following closely the WTO dispute settlement between the EU and Indonesia regarding various measures by Indonesia concerning nickel, in which the final report is expected in the fourth quarter of 2022.
On top of trade-related developments, the European Commission provided a proposal for the Carbon Border Adjustment Mechanism (CBAM) in July. The proposal currently includes only scope 1 emissions and, therefore, it does not create sufficient protection for carbon leakage. For stainless steel, it would be crucial that CBAM is applied to the whole carbon footprint (scope 1, scope 2 and scope 3).
Global apparent consumption for stainless steel flat products amounted to 39.3 million tonnes in 2021, an increase of 10.1% from 35.7 million tonnes in 2020. The demand in Americas and APAC increased by 25.5% and 10.8%, respectively, while EMEA only increased by 8.5%. (Source: CRU)
In 2021, global stainless steel production amounted to 58.9 million tonnes and increased by around 14% from the previous year 2020, which was heavily hit by the COVID-19 pandemic. The drop in output was pronounced in most regions, while output only grew in Indonesia and remained on the same levels compared to 2019 in China. On the one hand, this demonstrates the continuation of the rapid capacity build-up in Indonesia and on the other, China’s prompt recovery from the crisis caused by the COVID-19 pandemic. (Source: CRU)
Long-term market outlook remains positive
Following the sharp recovery in 2021, the long-term outlook for stainless steel demand remains positive, but is expected to normalize in the upcoming years. Global megatrends, such as urbanization, climate change, and increased mobility, combined with the growing global demand for energy, food, and water, are expected to support the future growth of stainless steel demand. In 2021, global steel production amounted to 1,912 million tonnes of which approximately 3% was stainless steel (Source: CRU, Worldsteel).
The demand for stainless steel products is impacted by global, regional, and national economic conditions, levels of industrial investment activity and industrial production. In 2021, the strong COVID-19 rebound and augmented raw material prices have led to increased stainless steel spot prices
Outokumpu always publishes latest quarterly outlook in connection with its interim report.