Mülheim an der Ruhr / Dordrecht — Oryx Stainless, the world’s third largest stainless steel scrap trading company, which is based in Mülheim an der Ruhr and Dordrecht/Netherlands, has, in the 2013 financial year, been able to maintain its global market position despite market-related low turnovers and tonnage. The low expectations of the previous financial year were undercut in the process. The group’s customers report on the most difficult environment for stainless steel in years.
In a market environment which was extremely weak worldwide, characterised by excess production capacities and weakening economic growth in China, as well as low nickel prices, the main component of stainless steel, the turnover of Oryx Stainless developed in step with that of European customers. Thus, the company achieved turnovers in the amount of EUR 430 million in 2013.
The average 3-month rate for nickel at the London Metal Exchange (LME) dropped from USD 17,625.00 per tonne in 2012 to about USD 15,000.00 per tonne. This corresponds to minus 15 per cent. The quote had dropped by 30 per cent in the previous year already. The average in the fourth quarter of 2013 was at below USD 14,000.00 per tonne.
Strategic importance of Asian operational base expanding
The operational base set up in Thailand in February 2012, which was further expanded in 2013, has continued to gain strategic importance for Oryx Stainless in light of the market development. Despite a difficult market environment, the activities in Thailand made a positive contribution to the performance of the company in 2013 as well, allowing the company to further expand its position in Pacific Asia.
Asia continues to be – despite a slight downward tendency in the Chinese general economic data – responsible for the dynamics of the global stainless steel industry. According to recent numbers by the International Stainless Steel Forum (ISSF), stainless steel production has increased by 18 per cent in 2013 in China as compared to the previous year. The global market, however, increased by „only“ 7.8 per cent in 2013 although this value is clearly above the long-term average of 5.9 per cent. The higher growth rate worldwide underlines the strong final demand for rust-, acid- and heat-proof stainless steel.
Global stainless steel production will amount to about 38 million tonnes for 2013 as a whole. The growing importance of Asia for the stainless steel market is also underlined by the fact that the share of global stainless steel production in this region, including China, has continued to increase and has by now reached more than 72 per cent, with China holding a share of about 50 per cent.
Indonesia’s nickel export ban increases demand
By expanding to Asia, Oryx Stainless is also well prepared for the currently changing nickel markets already. In January 2014, Indonesia had issued an export ban for unrefined nickel ore on the basis of a law adopted in 2009. This could result in diametral changes to the rules of the game in the stainless steel market in the years to come. In the past, nickel ores from Indonesia have been the main source for covering the gigantic Chinese demand for raw materials for nickel and constituted a significant competitive advantage for Chinese stainless steel producers over other producers. Nickel ores were refined in China into a primary nickel product called nickel pig iron (NPI).
This source of raw materials has now dried up, which should have a positive effect on nickel prices in the medium term. Prices for the remaining Indonesian ore stored in Chinese ports have already greatly increased, and even the primary nickel price at the London Metal Exchange (LME) was able to gain more than 22 per cent to a nine-month high of USD 16,300.00 per tonne compared to the lowest levels within just a few weeks since the introduction of the export ban. From the point of view of Oryx Stainless, future demand for stainless steel scrap is going to rise as well in the course of the Indonesian export restriction.
Benefits from export ban on nickel
„The export ban on nickel ore could completely change the rules of the game in the stainless steel and scrap market. The artificial competitive advantage of NPI and of the Chinese stainless steel producers is now removed. European stainless steel producers should benefit from this. The demand for stainless steel scrap, in particular in Asia, is going to increase considerably, not least because of the price advantage for the secondary raw material. Add to this that China in principle has a pent-up demand in the use of stainless steel scrap in the production of new stainless steel. Thus, China is not even using 15 per cent of scrap in the production of stainless steel thus far, while the rest of the world uses more than 50 per cent of this sustainable raw material,“ says Ewout Slooff, Executive Director of Oryx Stainless.
Especially in light of the growth dynamics in the region and not least with a view to the changes in the nickel market, the expansion of activities in Asia constitutes an important pillar of the future growth strategy for the group. The group has already secured another location for the associated increase in capacity with further expansion in Asia.
2014: Sales and revenues increasing again
For the 2014 financial year, Oryx Stainless, together with leading analysts, is assuming a 5 per cent worldwide growth in demand. After several years of consolidation, Oryx Stainless assumes that even Europe and the USA are going to make substantial contributions to growth again. But Asia will continue to be the engine of growth. For the further course of the year, Oryx Stainless is expecting at least stable nickel prices. Against the background of the export ban, however, and the difficulty of making a prognosis is clearly in the upper price range so that, if the ban continues to be strictly implemented in Indonesia, even considerably higher nickel prices are realistic in the course of the year. The associated increasing market phantasy, however, is also expected to increase volatility again (= fluctuation margin of prices), which fell slightly in recent years.
„Oryx Stainless and the stainless steel industry outside of China will benefit from the demand dynamics in Asia and the growth in Europe and the USA in 2014. The subsidisation of production in China with regards to raw materials has come to an end for the time being due to the development in Indonesia. As nickel prices rise, an increasing demand dynamics for stainless steel and for the raw materials required for production is going to develop as well because stocks in trade are at an historic low. Nevertheless, conservative hedging remains the only alternative because, as prices rise, speculative investors will increasingly enter into the commodities markets again, which will increase price fluctuations,“ says Roland Mauss, chief financial officer of Oryx Stainless.
For the 2014 financial year, Oryx Stainless expects a turnover of about EUR 600 million and thus a return to the growth trajectory seen in past years.
Six percent of the global market share
The Oryx Stainless Group, founded in 1990, is one of the world`s leading trading organisations for raw materials used in the production of high-quality stainless steels. The medium-sized, owner-managed enterprise, which employs a staff of about 130 with locations in Mulheim an der Ruhr, in Dordrecht/Netherlands and in Thailand, holds about 6 percent of the global market share. The company focuses its business activities on the handling and processing of stainless steel scrap into Oryx Stainless Blends. These secondary raw material blends – individually adapted for the respective stainless steel producers – replace above all primary raw materials such as ferronickel, ferrochromium and ferromolybdenum.
Source: Oryx Stainless Group