The Count of Count sends his regards

Nickel prices recently recovered
Despite all the talk, the nickel price was able to maintain itself on the London Metal Exchange (LME), even if at lower levels. Although prices were lower up to the second half of March, since the 24th March 2020 a slight upwards trend was seen. From the low of around USD 10,900.00/mt on the 23rd March 2020, the nickel price could recover to the level of USD 11,700.00/mt on the LME.

Since our last publication, Covid-19 has drawn even bigger and much wider circles. Actually this author had been determined not to write any more about the coronavirus, for, regardless of where one looks or reads, one cannot escape this world changing subject. Everything else pales in comparison. Of course, this is everything other than cheering.

The power of the amount of warnings, repetitions and metaphors of governments, experts and the media puts a harsh significance on the whole situation, allowing little time for reflection. Added to this, there are the powerful images which burn into the collective memory. Since hardly anything else is in the news, here are a few words about the continuing crisis. They are mostly expressed as questions, which each and every reader can answer for his or herself.

Research is being carried out at high levels with first advances still fragile
It is to be hoped that at least now, in our part of the world, signs of a first turning point to the positive are in evidence. And that, with better data and improved science and understanding, a clearer judgement can be made to the dangers of the virus and the best steps which should be taken. At the moment, there are not enough facts which can present a clear and conclusive picture. It is, however, important to note that currently, all around the world and around the clock, scientific research is being carried out, even if this does not come too much under the focus of the media. It is clear to everyone that the understanding of the virus and, therefore, how it is spread and dealt with, is of the highest priority, and not only amongst virologists. This should also give some hope.

People all around the world have discovered the joy, or to say less cynically, the coldness of numbers. The Sesame Street Count of Count would be really happy. Day after day, in nearly all countries of the world, the numbers of those infected are published, and, tragically, the rising number of mortalities. Is this thirst for numbers because the previously little known John Hopkins University, since the very beginning of the crisis, started to publish the numbers so graphically, that every journalist and individual can simulate their own situation centre? We are very close to that.

Numbers and statistics make sense for a better understanding
Then again, there were already many times in the history of the world when it would have been wise to reflect on numbers, perhaps to even then make changes. Both world wars, for instance, would have been such an opportunity, famines and epidemics in Africa and Asia, the war in Syria, deaths caused by climate change and many more. And counts have been taken at times, such as the deaths caused by the tsunami and the number of refugees drowned in the Mediterranean. But the dead are all too quickly forgotten. This author feels that all deaths are equally tragic and too early and all are too young, regardless of age. Therefore every Covid-19 death must be understood as each being a tragic individual and each had their own personal destiny. But to make an objective valuation, the number of mortalities has to be seen in relationship to other causes of death, even against the “normal” mortality rate of certain age groups.

This does not alter anything about the heartfelt mourning for lost lives, but does allow for a clearer view of the dangerous and hazardous nature of the virus. The danger is objective (if known); the (individual) risk is subject to one’s own actions and can be controlled. People then, therefore, within certain boundaries which, of course, should not intentionally endanger others, have the ability to set their own risk level by their own actions. Would it, therefore, not make sense, to make the statistics of age groups and underlying health issues more transparent? And also to report on the number of intensive care beds and ventilators available (at the moment only about 50% of hospitals report to an internet platform)? If people can be confronted with mortality rates, then they should also be provided with this information.

Political opposition maintains a discreet low profile
Why has the political opposition in Germany really become so quiet of late? The Greens, the Left, the FDP and even the right wing AfD, up until recently, all had big ambitions to govern, or at least take part in a coalition. Now it seems preferable to stay in the background. Is perhaps not governing nowadays preferable to being in government? Who does not drive a car is not able to cause an accident. It is as sure as the sun will rise in the morning that the media, not always the most objective anyway, will just as quickly drop those who had been previously praised once this crisis is more or less over. Nowadays, politics drifts along and delivers under fear of voter approval. For whichever public figure is praised today, can be criticised and attacked in the future. Not only in politics, but also in the media, it is all about support and awareness from the public, and it is also about power and importance, today more than ever.

Steel industry suffers twice, special factors with stainless steel
The steel industry, in today’s crisis, is basically being attacked from two sides. On the one, the demand in certain areas is weakening, and on the other, there are concerns about commodity procurement, since supply chains for the industry could potentially be disrupted. Fortunately, in stainless steel production, there is a wide sales portfolio for the usage of stainless steels so that a collapse in demand is not to be feared, even in present difficult circumstances. Although some material will become part of capital goods, different from the consumer goods and retail industry or the service sector, a temporary slump is not the same as a total outage. An investment can be postponed, even if this means replacing existing machinery or appliances, but not cancelled entirely. The investment can be made at a later stage during the year.

Anti-dumping measures and import quotas which have been introduced in Europe could support demand. As the news agency, Reuters, reports, the EU official journal has confirmed that provisional anti-dumping duties have been confirmed on stainless steel products from China, Indonesia and Taiwan, approximately eight months after a probe was launched. Duties range between 14.5% and 18.9% on Chinese and Indonesian goods and between 6% and 7.5% on imports from Taiwan. The duties are to help ensure fair trading conditions.

Imports from these countries had risen quite strongly recently and, according to the EU Commission, had reached over 30% of the market share. The complaint filed by the EU with the World Trade Organisation (WTO) about the export ban for nickel ore in Indonesia has still not been fully dealt with. The questionnaires sent by the EU Commission to Indonesian producers have not been answered satisfactorily and also on-site visits remained inconclusive. The investigation has shown that nickel commodities are being sold at more than 30% below world market prices.

Tariffs reduce import availability
On the whole, lower demand due to less available imports because of tariff duties have created a hole. Perhaps this experience of disruptions in the fragile supply chain can lead to end users having a little rethink, that it is not just price competitiveness which should always take priority, but that other qualitative factors should play a part in procurement decisions.

This, by the way, also applies to commodity procurement in steel works. When deciding on which commodity mixes to purchase, scrap or primary commodities, it was mainly based on economic optimisations. But this possibly is now seen differently. Even if, on the whole, less may be consumed, not all commodities will always be constantly available in the future. On the contrary, there are now restrictions in availability and logistical supply. An example is in the chrome production of South Africa, which will be viewed more detailed below.

Stainless steel scrap can fill the commodity gap
Stainless steel scrap is not only an international commodity, but also a regional one which is often more easily available for the commodity poorer countries, if in sufficient abundance. Stainless steel scrap can be just as scarce as some mined materials in its immediate availability, and above all, the price elasticity of the supply should not be underestimated, especially when taking into account certain psychological thresholds.

The phase of strong growth in China once proved just how big the supply can be. During that time demand for stainless steel and related commodities grew continuously as also did prices. Primary nickel supply, due to restricted production, could not keep up with the growth and nickel pig iron (NPI) production was in its first stages. It was a time when prices on the scrap market were favourable, especially in Europe, so huge quantities could be made available. In this respect, 2007 was indeed a temporary highlight in relative scrap availability, without even mentioning the sustainability advantages of the material.

Therefore, when it was often said that the scrap price had had to align to the price structure of NPI, it is recognised today that these competitive manipulations did not only cause stainless steel producers to suffer, but also stainless scrap suppliers. With the introduction of protective tariffs, this distortion has now been remedied and the argument made void.

State aid programs should ease effects of corona crisis
The consequences of the corona virus present some companies with huge problems. World-wide, states are, therefore, trying to support business. The German Federal government and the various state governments are supporting German companies with emergency measures such as guarantees and credits, so that they may survive the crisis unarmed.

The special German model of short-time work, which means workers jobs are not terminated in times of temporary work stoppages, was already proven during the financial crisis of 2008/2009, and has since been discussed and adapted in other countries. Under the model, the State temporarily takes over a portion of salary payments so that work places are not lost and there is no mass unemployment. As a result, the European Union is working on an EU concept for short-time work. The aid program, named “Sure” should help those EU countries which have been affected the most by the corona crisis.

ISSF announces figures for stainless steel production for 2019
On the 25th March 2020, the International Stainless Steel Forum (ISSF), with headquarters in Brussels, published its figures for global stainless steel production in 2019. Global production of stainless steel rose by 2.9 percent to 52.2 million tons in comparison to the previous year.

China recorded an increase of 10.1 % over 2018, whilst production in all other regions sometimes was drastically reduced. China produced a total of 29.4 million tons stainless steel in 2019, which corresponds to a world market share of 56.30%. Europe saw a 7.9% drop in production over the previous year, the biggest regional fall, and only had a market share of 13.0%.

No ferrochrome benchmark for the 2nd quarter 2020 yet
The European benchmark price for ferrochrome for the second quarter 2020 has still not been agreed upon, even though the quarter has already begun. It would appear there are still considerable differences in price ideas between producers and consumers. On the 26th March 2020, South Africa, a main exporter of the commodity, imposed a 21 day lock-down to try to slow the corona pandemic.

Because of the lock-down, the South African mining company, Merafe Resources, a joint venture between Glencore and Merafe, declared force majeure. All machinery is to be serviced and repaired. The company is one of the global leaders in ferrochrome production with a total output of 2.3 million tons annually. Pressure to establish a new reference price is therefore not high on their agenda.

The benchmark price is usually determined by the last week of the month previous to the new quarter. This reference price is negotiated between a South African ferrochrome producer and a European stainless steel producer.

South Africa’s three week lock-down is taking away China’s most important supply source for ferrochrome and chrome ores. However, Chinese stainless steel producers stress that, as a result of their own lock-down, they still have enough material to last for more than three months as almost 4 million tons are stored at Chinese docks.

A shock in chrome supply would normally drive prices sky high, but the Covid-19 crisis has also reduced demand.