Stainless buyers have a pretty thankless task.
The product they buy is sensitive to several different pressure points: steel prices, chrome, often nickel and sometimes other alloying element costs such as molybdenum, etc., Not only that, they must deal with mill capacities in an industry that is frequently characterized by re-stocking and de-stocking cycles.
This makes predicting where prices are going even more challenging than for products like aluminum or copper semis.
So we hope readers will excuse us for writing about the cost dynamics on a fairly frequent basis. Price and supply movements often happen in small steps and a rolling picture can be better than a quarterly in-depth report.
Today we ask, could stainless prices – at least austenitic nickel-bearing stainless prices – have bottomed?
Steel prices have been weakening, and so too has nickel (which is crucial for austenitic stainless prices). Nickel was down 12% last year and another 13% so far this year, according to Nickel Investing News.
The reasons are not hard to find.
The main one? An over-supplied raw material market producing nearly 100,000 tons more than required last year, and on track by various estimates for another 90,000 tons this year.
The exact numbers matter less than this grade-school equation: supply from new mines + supply from existing mines + Chinese Nickel Pig Iron (NPI) swing production = oversupply in a lackluster stainless market.
The current nickel cash price at about US $14,550 per metric ton is the lowest it has been since before the 2008 financial crisis, apart from a brief visit to the $9,000 level at the end of 2008 and into early 2009. Global nickel production reached an estimated 2.1 million tons in 2012, up from 1.94 million tons in 2011 and 1.59 million tons in 2010, according to data from the US Geological Survey.
Meanwhile in China, NPI production has surged in recent years.
To be continued in Part Two.