Stainless Steel Prices: the Origin of Price Volatility

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MetalMiner welcomes guest contributor Badri Narayanan, a lead analyst at Beroe Inc., who specializes in tracking various steel markets and related alloys. Beroe is the premier global provider of customized procurement services specializing in sourcing, supply chain visibility, financial risk analysis and environmental impact to Fortune 500 organizations. With nearly 400 dedicated procurement specialists in 38 domains, across 9 industries, Beroe proactively invests in knowledge assets to build valuable, real-time procurement insight. This is part two of his in-depth analysis of stainless steel pricing systems across the globe: “Stainless Steel Surcharge System—An Inconvenient Reality.”

Among all the commercial grades of stainless steel, the 304 grade and the 316 grade are the most widely used and also the most highly impacted grades due to raw material price volatility.

The 304 grade, with 18% chromium and 8% nickel is widely used in home appliances, process equipment and heat exchangers, whereas the 316 grade with 18% chromium and 10% nickel is commonly used in making surgical equipment, pipelines and process equipment. The high nickel and chromium content in these grades makes them highly susceptible to raw material price fluctuations.

Among the raw materials, nickel is the predominant cost driver for stainless steel. Nickel, which is traded in the London metal exchange (LME), is highly volatile and influenced by even the slightest of changes in the global economy. A varied spectrum of factors such as the currency fluctuations, macro-economic data release, and performance of equity markets influence the nickel price and thus the stainless steel alloy surcharge. The following graph and table illustrates the correlation between stainless steel and nickel prices.

Historical nickel prices as compared to stainless.

A correlation of 0.87 between nickel price and stainless steel price over the last 2 years highlighting further the volatility in stainless steel price due to nickel price volatility.

The above figure highlights the influence of raw material price fluctuation on stainless steel price. LME nickel price, with a standard deviation of USD 1,570 per MT (approximately 15% of current nickel price) over a period of past 24 months indicates the volatility associated with its price. This volatility is carried forward to the stainless steel price, with a standard deviation of USD 219 per MT (~8% of current stainless steel price) in the US and Euro 188 per MT in Europe (~9% of current price) in the similar period of time.

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Comment (1)

  1. Ramesh says:

    Is that correct for ever US Dollar 1 000 per ton movement in the Nickel price affects the stainless steel wire price by US Dollars 80 per ton. Is this an industry practice figure (USD 80/tonne) or its a listed figure in LME?

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