COMMODITY 2025: European stainless scrap outlook uncertain on sustained bearish fundamentals

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The stainless steel scrap outlook in Europe remains foggy as the market enters the new year on the back of waning demand and weak industrial activity in Europe, alongside continued finished stainless steel pricing pressure from Chinese overcapacity.

Scrap market liquidity remained quiet in Europe in the opening week of 2025 as higher relative prices in India saw stainless scrap prices on a CIF Nhava Sheva/Mundra basis around a $100/mt premium compared to CIF Rotterdam in early January, leaving Europe as a less favorable destination for stainless scrap, market sources told Commodity Insights.

Platts, part of S&P Global Commodity Insights, last assessed grade 304 stainless solids at Eur1,180/mt CIF Rotterdam Jan.15, having launched the daily frequency assessment on Oct. 11, 2024.

Scrap prices saw a decline across December 2024 from a high of Eur1,250/mt Dec. 4, as European producer demand dropped amid reduced capacity utilization, before stabilizing at Eur1,190/mt on a CIF Rotterdam basis at the end of 2024.

Market sources shared that Indian buyers often have to present a relative premium to attract stainless scrap volumes, amid sellside payment concerns.

"Liquidity is tight as downstream [Indian] players are extending the credit days - for instance, earlier it used to be 30 days, and now it's 45 to 60 days," a recycler source said.

Should EU stainless scrap demand increase in the coming weeks, importers will need to raise their bids to attract material away from India, sources said.

European Mill demand to remain weak

Demand for stainless scrap in the opening months of 2025 is set to be hindered by low buying interest from European mills, on the back of sustained poor market conditions for finished steel.

S&P Global Market Intelligence has forecast European domestic grade 304 stainless steel sheet prices to fall slightly in Q1 2025, down to $2,604/mt from $2,682/mt in Q4 2024. However, a slight uptick is expected in Q2 2025 to $2,682/mt.

"[Finished] stainless demand is very low, the overcapacity in China is consistent and the import pressure remains high," one European mill source said. "The price of stainless steel is extremely low. You see structural overcapacity and structurally lower demand in Europe. So, something is going to have to give next year."

The market enters the new year in an already tense economic environment. S&P Global's Purchasing Managers Index (PMI) data showed the eurozone economy contract for the second successive month in December 2024, reflecting a sharp reduction of output in the manufacturing sector.

Market sources noted that recyclers and traders are currently choosing to hold onto material, in the hope of an uptick in demand or higher London Metal Exchange (LME) nickel prices, rather than selling at a low price.

The LME nickel cash daily settlement price fell sharply in recent months from a peak of $17,920/mt on Oct. 3, 2024, down to a recent low of $14,770/mt on Jan. 3, but since recovered to $15,630/mt on Jan. 15.

Stainless scrap players follow the LME nickel price closely, with some supply contracts still using a formula basis LME, despite the frequent divergence in fundamentals in class 1 nickel products, which LME nickel prices reflect, and stainless scrap.

"Stainless scrap loses no value over time; it can be stored for 10 years and still be the same standard. We are now at historically low prices, so nobody wants to sell," a trader said.

How the incoming Trump administration in the US acts on trade policy could also have a knock-on effect on European stainless steel demand amid potential pressure from redirected import trade flows and subsequently scrap demand from European mills.

"Domestic demand in Europe [for stainless steel] is slowing, and EU producers face the prospect of Section 232 tariffs on stainless steel exports to the United States returning in addition to the prospect of higher tariffs on exports of all manufactured goods to the United States," Amanda Eglinton, Economics Associate Director at S&P Global Market Intelligence, said.

Market sources were hoping for improved stainless scrap demand in 2025, after a difficult 2024 where two of the largest EU mills were forced to pause production for periods.

Spain's Acerinox halted production for approximately four months following industrial action. Meanwhile, Outokumpu had a planned maintenance break at its Tornio plant in Finland, which also cut production levels. Outokumpu also ended the year with a profit warning and will be affected by a planned labor strike over Jan.27-Feb. 1, during which it plans to pause production at its Tornio plant.

The Nickel Pig Iron dilemma

European nickel pig iron (NPI) imports undercut stainless scrap prices in 2024, with many mills opting for cheaper materials in their production.

"If scrap is cheap then people prefer to use it as a base, but if scrap demand is high and prices go up then NPI is an alternative. In summer 2024, CIF Rotterdam scrap prices were too high and that caused some producers to import NPI," said another trader.

Many European mills prefer not to use nickel pig iron due to its large carbon footprint, however, with margins already tight for producers, others think that the material is here to stay in 2025.

However, longer-term, with European stainless mills already at high scrap utilization rates, and with the EU's Carbon Border Adjustment Mechanism (CBAM) entering into force for the iron and steel sector in 2026, NPI may not be a viable input.

While CBAM may support European stainless scrap consumption over more carbon-intensive raw material inputs, European stainless steel CEOs have suggested the implementation of CBAM will render EU-finished stainless steel exports uncompetitive in the global market.

Platts last assessed FOB Indonesia nickel pig iron at $115/mtu Jan.15, up $3/mtu on the day.