Italian stainless steel company AST suspends production: challenges and responses faced by the global stainless steel industry
On December 15, 2023, Italian stainless steel company AST (Acciai Speciali Terni) announced that it would cease production on December 19 and is expected to suspend production for 20 days. The union said the main reasons were a long-term decline in orders and a sharp rise in energy and raw material costs.
AST is one of the top four full-process stainless steel flat steel manufacturers in Europe, with an annual production capacity of approximately 1.4 million tons. Crude steel production in 2022 will be 1 million tons. The suspension of AST's production will have a significant impact on the European stainless steel industry and exacerbate global stainless steel supply shortages.
1. Background of AST discontinuation of production
The background of AST's suspension of production is a series of challenges faced by the global stainless steel industry.
Global economic growth slows
In recent years, global economic growth has slowed, resulting in a decline in demand for stainless steel. According to the World Steel Association, global stainless steel demand growth is expected to be 1.8% in 2022, down from 4.4% in 2021.
The ongoing impact of COVID-19
The ongoing impact of the COVID-19 epidemic has also had an impact on the stainless steel industry. The COVID-19 epidemic has disrupted global supply chains and increased stainless steel transportation and trade costs. In addition, the new crown epidemic has also affected major demand industries for stainless steel such as construction and automobiles.
Energy and raw material costs rise significantly
In recent years, global energy and raw material prices have continued to rise, putting cost pressure on stainless steel production. According to data from Mysteel, in December 2022, the price of nickel, the raw material for stainless steel in China, rose by about 30% year-on-year, and the price of coke rose by about 20% year-on-year.
2. Impact of AST's discontinuation of production
The discontinuation of AST will have the following impacts on the European stainless steel industry:
Reduce European stainless steel production
AST is one of the top four full-process stainless steel flat steel producers in Europe, and its suspension will reduce European stainless steel production. According to data from Mysteel, European stainless steel production is expected to be 19 million tons in 2022.
Exacerbating global stainless steel supply shortage
Currently, global stainless steel supply is already in a tight state. According to the World Steel Association, the global stainless steel supply gap is expected to be 1 million tons in 2022. The suspension of AST's production will exacerbate the global stainless steel supply shortage.
Impact on stainless steel prices
The suspension of AST's production will increase the tightness of stainless steel supply, thereby pushing up stainless steel prices. According to data from Mysteel, in December 2022, stainless steel prices in China increased by approximately 20% year-on-year.
3. Current status of China's stainless steel industry
China is the world's largest stainless steel producer and consumer. In 2022, China's stainless steel production is expected to be 58 million tons, and consumption is expected to be 60 million tons.
Like the global stainless steel industry, China's stainless steel industry also faces a series of challenges.
Downward pressure on the economy
China's economy is facing downward pressure, which will lead to lower demand for stainless steel.
Rising energy and raw material costs
Rising energy and raw material costs have also put cost pressure on China's stainless steel industry.
Competition is fierce
China's stainless steel industry is highly competitive, which has led to declining profit margins.
4. From a supply perspective, the suspension of production by Italian stainless steel company AST will have the following impact on global stainless steel supply:
Reduce global stainless steel production
AST is one of the top four full-process stainless steel flat steel manufacturers in Europe, with an annual production capacity of approximately 1.4 million tons. Its suspension will reduce global stainless steel production by approximately 1%.
Exacerbating global stainless steel supply shortage
Currently, global stainless steel supply is already in a tight state. According to the World Steel Association, the global stainless steel supply gap is expected to be 1 million tons in 2022. The suspension of AST's production will exacerbate the global stainless steel supply shortage, widening the supply gap to 1.1 million tons.
Push up stainless steel prices
A shortage of stainless steel supply will lead to an increase in stainless steel prices. According to data from Mysteel, in December 2022, stainless steel prices in China increased by approximately 20% year-on-year. The suspension of AST's production will further push up stainless steel prices.
Impact on the pattern of stainless steel industry
The suspension of AST's production will bring a new competitive landscape to the European and global stainless steel industry. European stainless steel producers will face greater competitive pressure, while Chinese stainless steel companies will have the opportunity to expand market share.
5. Response of Chinese stainless steel companies
Faced with the challenges of global stainless steel supply shortages and rising prices, Chinese stainless steel companies need to take the following measures to respond:
Increase production capacity
China is the world's largest stainless steel producer, but there is still room for improvement in capacity utilization. Chinese stainless steel companies can meet market demand by increasing production capacity.
Expand overseas markets
Chinese stainless steel companies can reduce their dependence on the domestic market by expanding overseas markets. Chinese stainless steel companies can actively participate in international cooperation and seek opportunities in emerging markets.
Strengthen technological innovation
Chinese stainless steel companies can reduce costs and increase product added value by strengthening technological innovation. Chinese stainless steel companies can develop new production processes and products to meet customer needs.
6.From a supply perspective, the suspension of production by Italian stainless steel company AST will have the following impact on stainless steel prices:
Reducing global stainless steel supply
AST is one of the top four full-process stainless steel flat steel manufacturers in Europe, with an annual production capacity of approximately 1.4 million tons. Its discontinuation will reduce European stainless steel production and thereby reduce global stainless steel supply.
Exacerbating global stainless steel supply shortage
Currently, global stainless steel supply is already in a tight state. According to the World Steel Association, the global stainless steel supply gap is expected to be 1 million tons in 2022. The suspension of AST's production will exacerbate the global stainless steel supply shortage, thereby pushing up stainless steel prices.
Increase stainless steel price fluctuations
The suspension of AST's production will increase the tightness of stainless steel supply, thereby increasing stainless steel price fluctuations.
Specifically, the suspension of AST production will have a greater impact on the following stainless steel varieties:
EU market
AST is one of the important stainless steel suppliers in the EU, and its suspension of production will reduce the supply of stainless steel in the EU, thus pushing up the price of stainless steel in the EU.
304 stainless steel
AST is one of the major manufacturers of 304 stainless steel. Its suspension of production will reduce the supply of 304 stainless steel, thereby pushing up the price of 304 stainless steel.
Stainless steel for automobiles
AST is one of the suppliers of automotive stainless steel. Its suspension of production will reduce the supply of automotive stainless steel, thereby pushing up the price of automotive stainless steel.
Overall, the suspension of production by Italian stainless steel company AST will have a significant effect on global stainless steel prices.
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