COVID-19 related government-imposed lockdowns in key global stainless steel producing regions during the first half of the year (H1 2020), resulted in production curtailment of stainless steel of 11% year on year.
While Chinese stainless steel production in the first quarter of the year 2020 (Q1 2020) plummeted to levels last seen in early 2016, it recovered strongly during the second quarter of the year 2020 (Q2 2020), backed by government infrastructure spending.
As a result, Chinese stainless steel production is expected to end the H1 2020 down 8% compared to the first half of 2019. Non-Asian stainless steel production remained mostly stable during Q1 2020 due to the delayed onset of COVID-19.
However, as national lockdowns took effect and demand rapidly reduced, the rest of world stainless production dropped quickly during Q2 2020, with European production down 18% and US production down 12% on H1 2020, year-on-year.
Weak demand and inflated stainless steel stocks outside of China continue to weigh on global stainless steel pricing.
Global ferrochrome consumption fell 8% year on year during H1 2020 with global supply experiencing a more severe 20% drop during the same period. Production in South Africa was particularly impacted, falling 50% in Q2 2020, not only because of COVID-19 cutbacks, but also due to the ongoing cost pressure including unsustainably high electricity pricing.
Chrome ore exports from South Africa were down 16% year to date (YTD) compared to 2019 as of May 2020, at 4.8 million tonnes. Pricing remained subdued during Q1 2020 given an oversupply, with Q2 2020 seeing higher prices due to concerns relating to SA export volumes as a result of COVID-19 related supply interruptions.
Reduced shipments ex South Africa caused Chinese chrome ore port stocks to fall from a peak of 4.3Mt during the period to 3.6Mt at the end of June.
The European benchmark ferrochrome price for H1 2020 averaged USD107.50 cents per pound, down 7% from the June 2019 average of USD116 cents per pound.