Sustainability is the key
The main growth drivers for the stainless steel industry are global megatrends such as urbanization, mobility, economic and population growth as well as climate change. 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 is 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 the circular economy. This covers an energy efficient production by using low-carbon electricity, minimizing waste, and the use of as much recycled resources as possible in our production. Nearly two years ago, we introduced Outokumpu Circle Green®, the first of its kind globally, as no other stainless steel manufacturer has been able to produce stainless steel with such low emission levels when taking into account all the climate emissions from raw material extraction through the whole production chain. In 2023, we were able to increase the number of partnerships in this area during 2023. Additional steps have been taken to secure a sustainable value chain, such as partnering with scrap supplies in our initiative, the Inner Circle.
We sell our stainless steel 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 2023, around 53% of our business area Europe’s stainless steel flat products were sold directly to end-user customers, with the share of end-users rising from the previous year. The remaining 47% were delivered to distributors that stock and process stainless steel to serve end-users. In the Americas business area, distributors have a higher share than in Europe, 72% and 38% for end-users, respectively.
Global market with a few big players
Outokumpu operates in the global stainless steel market. We are known in the market for our world-class assets, comprehensive product portfolio and proven expertise, which form a sound foundation for our strategy execution and future success. In 2023, the market for cold-rolled flat products totaled approximately 30.8 million tonnes.
Outokumpu’s global market share was approximately 3.2%. Outokumpu is the market leader in Europe, given our cold-rolled market share of 33%. Our market share increased in comparison to the previous year due to a significant drop in imports. The import rate in 2023 amounted to 19% compared to 35% in the previous year. In the USMCA region, our market share stands at 23%, making Outokumpu the clear number two in the Americas. In the U.S. market, Outokumpu’s share amounts to approximately 21%.(Sources: CRU Stainless Steel Flat Products Market Outlook November 2023, EUROFER, Foreign Trade Statistics, American Iron & Steel Institute, StatsCan, Canacero)
Especially in Asia, stainless steel producers were growing. 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 1,850 million tonnes of which approximately 3.1% was stainless steel.
(Source: CRU Nickel Monitor February 2024, Worldsteel December 2023)
In 2023, the global stainless steel production capacity of slabs remained stable, increasing by approximately 1% to 72.6 million tonnes. The global utilization rate was calculated at around 71% in 2023, the same as in 2022. In the second half of the year, estimations on
apparent consumption were revised downwards in order to indicate slowing global stainless steel demand.
(Source: CRU Stainless Steel Flat Products Market Outlook November 2023)
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.
Market adjustment after an overheated post-pandemic period
The year 2023 started with improving market confidence as better-than-expected European economic data, China’s re-opening after the pandemic and the seasonal cycle indicated positive market activities. However, production was high while demand remained below expectations and the market entered a phase of re-adjustments. Distributors continued to destock their inventories and preferred
ordering smaller volumes, being cautious and waiting for clearer signs of improvements in underlying demand. Elevated inventory levels and high energy costs exacerbated producers’ positions. In China, economic recovery materialized slower than anticipated.
Entering the seasonal slow summer period, the European market remained subdued, affected by poor economic conditions. Supply outpaced demand and producers extended their summer breaks in order to balance the market. After a long destocking period, distributors started to replenish their inventories in the third quarter. The positive effects of this weakened soon as underlying demand from end-users remained limited. Uncertain of future demand and price developments, buyers preferred ordering material hand-to-mouth.
In the first half of 2023, prices for stainless steel flat products decreased significantly, closing the gap between European and Asian prices. Imports became unattractive as domestic material was available at short-hand and prices were at similar levels. After reaching the bottom, the second half of the year saw a rebound in prices, driven by distributors’ restocking activities, fewer imports and tight
domestic supply as a result of extended summer shut-downs at European producers. Prices in China developed similarly, coming under pressure from a weak demand recovery and an oversupplied market. Chinese producers started to cut their output, but production remained at elevated levels.
The start of an anti-circumvention investigation against Indonesian material entering the EU via Taiwan, Turkey and Vietnam created additional downward pressure on imports. Buyers stopped ordering Asian material to avoid possible retroactive duties. The start of Carbon Border Adjustment Mechanism’s or CBAM’s product registration process is a further regulatory step that will affect non-EU material in the future.
Economic data during 2023 indicated the start of a recession in Europe. Inflation in the euro-zone was high, but gradually declined over the course of the year. Energy prices decreased, but remained at higher levels than prior to the start of the Ukrainian war. The looming risk of an escalation of the Middle-East crisis created additional economic uncertainties.
Global apparent consumption of stainless steel flat products amounted to 39.5 million tonnes in 2023, growing +0.1% and stable compared to 39.4 million tonnes in 2022. Demand in APAC increased by 5.4%, while in the Americas it decreased by 11.7% and in the EMEA region by 18.3%.
(Source: CRU Stainless Steel Flat Products Market Outlook November 2023)
2024: Recovery expected, but limited
The global economy is expected to remain at moderate levels in 2024, although slowing down in comparison to 2023. Inflation in Europe is set to continue its downward trend, while the U.S. economy may slow and enter recession. GDP expectations from China may support an increase in growth, but is missing signs of a clear demand recovery and reluctance in the private sector to invest remains a moderate upside risk.
World GDP is expected to have grown 2.5% in 2023. For 2024, growth is expected at 2.0%.
(Source: CRU Global Economic Outlook December 2023)
Growing regionalization, as opposed to globalization, as well as newly introduced trade barriers may support a shift by EU buyers to ordering domestic material. As a consequence, sentiment and production in Europe may recover, still at a slow pace, though, as an improvement in demand is only likely to materialize in the second half of 2024. Demand in the U.S. is likely to be subdued with large projects being delayed due to high interest rates. A likely decrease in interest rates may bring some positive stimulus to both economies in Europe and the U.S.
The Chinese stainless steel market is expected to experience a destocking phase due to elevated stock levels and overcapacities before a demand recovery may boost the market and imply stronger growth rates in 2024.
(Source: CRU Stainless Steel Market Outlook November 2023)
Latest updates
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