Serhiy Savenko: How the stainless steel market has changed in Ukraine: demand, price trends, forecasts

In the stainless steel market, demand remained higher than in the ferrous rolled steel market

The demand for stainless steel, in contrast to ferrous rolled steel, did not fall so low in 2022. Of course, there was some mixed decline in February and March, but then the situation more or less leveled off. While ferrous metal producers and traders said that demand in 2022 fell by 80% from pre-war levels, in the stainless steel market the average drop in demand in 2022 was only 40%.

This is explained by the fact that unlike ferrous rolled steel, which is in demand in the construction process, which stopped in 2022, stainless steel was needed for the functioning of the food industry, the field of medicine, transport, and the chemical industry.

Conditions dictated by the market in 2022 due to war

In the stainless steel market, demand remained higher than in the ferrous rolled steel market. The fact is that the ferrous rolled steel segment is tied to the construction business. The main segment of our company is the food industry and it works quite powerfully and recovers quickly. In 2022, our major clients stopped working with Russian and Belarusian firms, and instead established cooperation with the Arab Emirates, Saudi Arabia and other countries of the East.

By the way, already from January 2023, we are observing an increase in demand. For us, these months are better than the war months of 2022. This situation is connected with the recovery of the market. Our clients, whose production was damaged by Russian missiles, were restored before and are actively being restored now.

For example, one of our clients, Kominvent, has already resumed production in the Kyiv region, the largest company in Ukraine that produces chimney systems.

The relocated business continues to develop in new locations. For example, our client – Khimmix – a producer of food mixers, which before the invasion worked in the Zaporizhzhia region (Melitopol), moved its production facilities to Ivano-Frankivsk.

As for sales in the geography of our company, now Modus sells 15% more in the west of Ukraine, where companies have relocated and internally displaced persons have moved.

How logistics changed during the war

With the beginning of the war, the port in Odesa, through which all the supply chains of stainless rolled steel used to pass, was closed. In search of new logistics chains, we decided to try to bring small batches of stainless steel through several European ports and calculate the costs, choose a more optimal option in terms of cost and time frame.

Thus, we delivered test loads through Constanta (Romania), Koper (Slovenia), Gdansk and Gdynia (Poland), Klaipeda (Lithuania), Hamburg (Germany), and others. After making the calculations, we stopped at Gdansk – the price and speed won.

As for the cost of the new transportation chains in the spring of 2022, they were much more expensive than the pre-war ones. Prices have risen on new routes. Currently, the prices for logistics, which our company has, are even lower than before the war due to the drop in the price of freight on the world market.

Rates for freight from China to Odessa have increased several times since the beginning of covid. If they stayed at the level of $600-800/container, depending on the season, then after the start of covid (2020) they increased to $7000-8000/container.

In the summer-autumn period of 2022, freight rates were at the level of $5,600-6,000/container. By the way, on the example of a 20-foot container. If we talk about a 40-foot one, then the cost should be doubled.

Before the war, taking into account the delivery of steel from Odessa to Kyiv, the total cost of shipping 1 metric ton of stainless steel was about $400, and before covid – about $100.

With the beginning of the war, goods were transported by motor vehicles from the ports and warehouses of Poland. This added to the cost of logistics. If the transportation of goods by car cost about 1,000 euros in the pre-war period, then in the summer-autumn of 2022 it amounted to 5,000-5,300 euros.

Over time, Poland became the main logistics hub, where new warehouses were opened en masse, which made it possible to transfer goods from a container to a truck faster and safer. Simplification of the procedure for international road transport opened the possibility of increasing the flow of goods between countries, which lowered the prices for road transport (€2300-2500).

At the beginning of 2023, freight prices decreased significantly (about $1,000/container), which in total had the greatest impact on reducing the level of logistics costs. As of today, the cost of delivering cargo to our warehouse is already about $210 a ton. In particular, now the suppliers demand advance payment for the goods, although they used to pay upon the arrival of the goods in Odesa.

How trends in the stainless steel market have changed

The market is divided as follows: 40% – pipe products, 60% – flat rolled steel, graded rolled steel is not very popular, but we keep a large assortment in our warehouses so that, if necessary, the customer can receive his order.

The war and sanctions changed a lot in the world market and this was felt in the spring of 2022. Due to the ban on Russian nickel, its price has increased greatly. They asked for 100 thousand dollars per ton for it, but this situation did not last long. The price soon decreased and stabilized. A ton of nickel is now worth $22,500.

Current prices in Kyiv as of March 30 for the most popular types of stainless rolled steel (including VAT):

Sheet AISI304.2B 2x1250x2500 mm – UAH 135 per kg;
Sheet AISI304, VA 2x1250x2500 mm – UAH 138 per kg;
Sheet AISI430,4N08x1250x2500 mm – UAH 88 per kg;
Sheet AISI201,4N08x1250x2500 mm – UAH 86 per kg;
Pipe AISI201 30x30x1 – UAH 74 per meter;
Pipe AISI304, polished. 50.8×1.5 – UAH 255 per meter;
Circle AISI304 from 8 to 100 mm – 144 UAH per kg.

Market prospects for 2023

The year started optimistically. The first month of 2023 in terms of sales exceeded the more successful months of 2022. This inspires optimism. However, as we know, everything depends on the situation at the front. If the situation is stable, thanks to the Armed Forces, then demand and, accordingly, market volumes will grow.

Before the war, the volume of the Ukrainian stainless steel market was 40,000 tons per year. In 2022, it will be approximately 22-24 thousand tons. We are afraid to forecast the market volume for 2023 due to many factors, but we predict that it will not be lower than 22-24 thousand tons.