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. These megatrends drive the demand for economic, social, and environmental sustainability as well as the need to develop sustainable solutions that are durable and can be reused at the end of their lifecycle.
Our commitment and contribution to sustainability are embedded throughout our value chain from procurement and production to customer deliveries. 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. In 2022, we presented the new sustainable product, Outokumpu Circle Green, the world’s first emission-minimized stainless steel.
Global market with a few big players
Outokumpu operates in the global stainless steel market. We are known in the market for our worldclass assets, comprehensive product portfolio and proven expertise, which form a sound foundation for our strategy execution and future success. In 2022, the market for cold-rolled flat products totaled approximately 30.5 million tonnes. Outokumpu’s global market share was approximately 3.6%. Outokumpu is the market leader in Europe, given our cold-rolled market share of approximately 26%, impacted by elevated imports into EU30. In the USMCA region, our market share stands at 23%, making Outokumpu the clear number two in the Americas. Focusing on the US market, Outokumpu’s share amounts to around 22%.
(Sources: CRU Stainess Steel Flat Products Market Outlook November 2022, EUROFER, Foreign Trade Statistics, American Iron & Steel Institute, StatsCan, Canacero)
Overcapacity has burdened the stainless steel industry 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. Global steel production amounted to 1,391 million tonnes of which approximately 4.1% was stainless steel.
(Source: CRU Nickel Monitor January 2023, Worldsteel).
In 2022, the global stainless steel production capacity of slabs increased by roughly 16% to 70.3 million tonnes. The global utilization rate was calculated around 66% in 2022, down from 80% in 2021, when mills operated at full steam. In the second half of 2022, the market slowed down and faced decreasing production volumes.
(Source: CRU Stainless Steel Flat Products Statistical Review November 2022)
As the production of stainless steel is capital intensive, producers generally aim for continuously high capacity utilization in order to maintain and improve profitability. 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.
2022: a year with two different halves
Exceptional circumstances in 2021 were an outcome of unprecedented order intake growth, mainly due to economic stimulus across the world and a successful rollout of COVID-19 vaccines. For many markets, the momentum continued into the first quarter of 2022, leading to upwards revised cold-rolled apparent consumption for the first quarter. With extraordinary high base prices, profitability of mills in Europe and the USA remained on a high level.
After the start of the war in Ukraine in the first quarter of 2022, the market saw unprecedented nickel price volatility and raising energy costs putting European producers under pressure. Uncertainties of cost development undermined consumer demand, and stocks were full. Mills’ order books normalized in the second quarter, with European producers’ lead times extending to two−three months for commodity grades.
During the second half of 2022, the stainless steel market saw a steep correction. High energy prices and consumer inflation created a challenging landscape in Europe as demand weakened. Logistical constraints and a shortage of components continued to weigh on industrial production worldwide. In China, strict COVID-19 restrictions and extraordinary weather conditions delayed demand recovery and pessimism among producers led to production cutbacks.
During the first quarter the wide price gap between European and Asian material offered many advantages for importing material and led to an extraordinary high import penetration. The difference between transaction prices narrowed in the course of 2022, and imports became more and more unattractive. Decreasing base prices and shortening lead times in Europe made domestic ordering more favorable, starting in autumn 2022.
Global apparent consumption of stainless steel flat products amounted to 39.6 million tonnes in 2022, a gain of 0.4% vs. 39.4 million tons in 2021. The demand in APAC decreased by 0.8%, while Americas and EMEA were able to grow by 0.4% and 6.5% respectively.
(Source: CRU Stainless Steel Flat Products Market Outlook November 2022)
In China, domestic production has rebounded strongly, but strict lockdowns in key consuming and logistical hubs severely undermined demand.
Challenges ahead but recovery expected
The global market will remain turbulent and mixed throughout 2023 when it comes to apparent consumption growth.
While Europe may struggle with an upright recession and energy crisis, the Chinese market may not recover as fast as expected. The end of strict COVID-19 restrictions might lead to disruptions in economy during the first quarter, but in the long-term stronger growth rates are to be expected. Extreme climate conditions and weakening global demand could impose additional uncertainty on the market. Although being more independent from energy supply than Europe, the US demand is still challenged by high distributor inventories, high-interest rates, an uncertain economic outlook and volatile costs. These factors will result in some uncertainty in 2023.
The world GDP is expected to have grown 3.0% in 2022. For 2023, growth is expected at 1.5%.
(Source: CRU Global Economic Outlook December 2022)
Outokumpu always publishes latest quarterly outlook in connection with its interim report.