Stainless steel prices likely to see increases on higher demand, lower supply

Stainless steel prices likely to see increases on higher demand, lower supply

Stainless steel prices likely to see increases on higher demand, lower supply

 from S&p global commodity lnsights

     ELECTRIC POWER | METALS      04 Mar 2022 | 16:45 UTC

Stainless steel, other steel products to continue upswing: sources

Nickel hits above $30,000/mt in intraday trading Mar 4

Stainless steel prices are expected to see increases on higher demand, lower supply and higher raw material costs, industry sources told S&P Global Commodity Insights in the week to March 4.


Stainless steel and other steel products have continued their upswing as the global markets recover from the pandemic, with producers having posted their best earnings in recent history last year.

Higher energy prices nevertheless were already an issue in fourth-quarter 2021, with mills having to increase prices. With the additional challenge of the Russian invasion of Ukraine currently, supply of key ingredient nickel was getting limited and pushing energy prices even higher.

The market is already pricing a degree of supply risk as the recent price surge shows, according to a source from a large stainless steel producer.

"According to many analysts, a 30+k scenario is likely if the disruption of supply is fully materialized. We do not have any better knowledge of the price development in a very volatile market," he said.

Norilsk in Russia is the world's second-biggest exporter of Class 1 nickel and covers about 50% of the London Metal Exchange stocks. At present, LME holds 80,000 mt of Class 1 nickel. Normally, it holds around 200,000 mt.


Stainless steel products are mainly produced with 80%-90% scrap and approximately 10% Class 1 nickel, with both products expected to increase together with higher energy costs.

"With no nickel imports from Russia, we think that nickel stocks in the EU can go very quickly under 40,000/mt. In 2006 when the price of nickel exploded to $55,000/mt, the stocks at LME were precisely at this level of 40,000 mt," a spokesperson for Euranimi, the European association of independent stainless steel and aluminum importers, told S&P Global.

"Perhaps now can be even worse: Russia/Belarus/Ukraine export 150,000-200.000 mt/year of scrap with 9%-10% nickel to Rotterdam. In round numbers, this corresponds to a production of 200,000 mt tons of stainless steel," the spokesperson added.

Other sources said although prices can go up mainly on higher energy costs, if the supply of Class 1 nickel becomes particularly tight, "then major producers will become inventive, as they have been in the past to ensure production in support of market demand continues".

"Nickel can be substituted by manganese in a proportion of stainless steels produced and these manganese-bearing grades represent around 22% of global production currently," an analyst said.


Europe produced 6.76 million mt of stainless crude steel in 2019, according to Eurofer data. In term of finished products, Ukraine and Russia have no significant exports of flat products to the EU, but with the exception of seamless tubes and hollow bars. Ukraine exports about 20,000-25,000 mt to EU of bars every year. The remaining approximately 30,000 mt goes as billets to other mills.

Ukraine's exports of seamless tubes and hollow bars to EU are of sizable volume, a Euranimi spokesperson said.

On top of this, such products are already in short supply in Europe and their imports from Asia are currently either under antidumping restrictions from China or the object of severe customs scrutiny, as a consequence of a report issued by OLAF on alleged circumventions of the AD measures.

The stainless steel sector largely drives global nickel demand, accounting for about 70% of all nickel demand. Alloys take up around 20%, with such demand likely to take the longest to return to prepandemic levels.

The metal is also set to play a pivotal role in energy transition due to the growing market for nickel-cobalt-aluminum batteries used in electric vehicles, which account for around 10% of all nickel demand.

The LME three-months spot nickel price was trading at $29,690/mt as of 1424 GMT March 4 while hitting $30,295/mt in intraday trading. Nickel last closed above 30,000/mt in late-March 2008 at $31,450/mt.