Desing System
Nickel price volatility; how is it impacting the stainless steel industry and risking future demand?
We all know that history has a way of repeating itself, and it’s no different in the dynamic world of stainless steel. As the global market evolves, steelmakers and end-users develop new materials and applications, making people’s lives easier and bringing new technological and commercial insights to the supply chain. However, understanding significant events from the past can be crucial to clear the way for developments in the future.
Nickel prices went through the roof on March 8, 2022, climbing above the unbelievable amount of USD 100,000 per ton, which led to the suspension in any trading activity in the London Metal Exchange (LME) for this material. After a few days, on March 16, 2022, LME tried to reimplement trading activities but suspended them again after a few minutes due to system errors, leading the market into a chaotic Wednesday.
If you’ve been in this industry for a while, you know that nickel volatility is nothing new and will recall a spike in prices in 2007, peaking above USD 54,000 per ton. On that occasion, prices peaked over a few months instead of a few days, as in the current situation. The world was also not facing major conflicts or a global pandemic. However, a few months after the nickel price peaked, the Global Financial Crisis (GFC) took place, proving the concept that the volatility is there and will be there in the future.
Raw material price volatility is bad news for stainless steel end-users who are exposed to increases in alloy surcharge prices. There are indications that the alloy surcharge for austenitic stainless steel will be higher in May 2022 than the total price of the same steel in February 2022. Therefore end users who didn’t forecast that the nickel prices would rise to these high levels could have issues in the coming months.
Once this migration has taken place, the recovery mentioned in the paragraph above will most likely not happen.
Another major technical aspect to consider is the materials’ corrosion performance and surface quality. Ferritic grades have evolved so much that some perform better than the classical AISI 304/AISI 304L. Therefore, implementing this modification could be done quickly and effectively without compromising the performance of many products. One major example is the elevator industry which has already migrated a significant percentage of its components, while most panels are already specified in ferritic materials.
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