It is reassuring to see a metal price driven by good old fundamentals.
With so much buzz around supercycles and electrification, the impact of the speculative element in pricing has been much in evidence this year for products like copper and oil.
But according to a recent Reuters post, solid supply and demand fundamentals are driving nickel.
Supply and demand fundamentals pushing nickel prices
Oksana Kuzmina/Adobe Stock
A strong rise in the nickel price early this year resulted in the three-month LME quotation hitting a seven-year high of over $20,000 per ton before crashing back to $15,665 during the first half of March. Announcements by Tangshan Stainless in Indonesia that it would switch production of its refined nickel output to an EV cathode battery chemistry undermined the presumption of a looming shortfall in battery quality metal.
The narrative has since moved from nickel being a tight battery grade metal market to simply a tight refined metal market.
As steel prices continue to rally, stainless steel producers in China seem to be saving costs by replacing refined nickel with nickel pig iron (NPI). NPI is a lower-nickel-content substitute for refined nickel.
Satellite service SAVANT, which tracks smelter activity, reported that nickel smelting activity was lower than seasonally expected. The company claimed global nickel activity for June was at its lowest in five years.
At the same time, NPI smelting activity in China grew significantly, making April and June the highest readings in the past five years.
Tentative agreement between ATI, USW
After a three-months strike, Allegheny Technologies Inc (ATI) and the United Steelworkers (USW) reached a tentative agreement on July 2.
The agreement includes onetime payments, wage increases and a premium-free health insurance plan for union members. As soon as the agreement is signed, USW members are expected to resume work.
The strike affected approximately 1,300 workers in specialty rolled products locations across nine locations: Brackenridge, Latrobe, Natrona Heights, Vandergrift, Washington (Pennsylvania), Lockport (New York), Louisville (Ohio), New Bedford (Massachusetts) and Waterbury (Connecticut).
The specialty rolled products include a variety of stainless steel sheets, specialty coils, cold rolled stainless steel, and stainless and specialty alloy plates. More specifically, these plants produce: light gauge cold rolled stainless steel strip; titanium strip and sheet; nickel; precision rolled strip; cold rolled stainless; and alloys, such as high-temperature, corrosion-resistant, nickel-based and duplex.
As MetalMiner previously reported, the ATI strikes constrained U.S. stainless flat-rolled supply. For months, industrial metal buying organizations faced serious challenges in purchasing metal, not only due to the supply constraint but also because stainless steel prices are at an all-time high. In addition, soaring freight rates have also made imports a costly proposition.
Base price consolidates
After U.S. mills announced their fourth base price increase of the year in June, no further increases were announced for July.
U.S. mills have increased prices on products, which reduce available production capacity. Alloys other than 304, 304L and 316L have been subject to greater increases. Non-standard widths and light gauge extras have risen several times in the last six months.
Buyers should expect additional extras increases as mills continue to optimize their product mix to maximize volume.
Alloy surcharges are increasing in July. NAS’ July alloy surcharge for 304 is $0.9930/lb, an increase of $0.0318/lb compared to June.
Actual metals prices and trends
The Allegheny Ludlum 304 stainless surcharge ticked up by 3.0% month over month to $1.02 per pound this month. Meanwhile, the Allegheny Ludlum 316 surcharge surged to $1.45 per pound.
Chinese 316 cold rolled coil dropped 0.6% to $3,903 per metric ton as of July 1. Meanwhile, 304 cold rolled coil climbed 2.5% to $2,865 per metric ton. Chinese primary nickel surged by 0.5% to $21,093 per metric ton.
LME three-month nickel jumped 3.3% to $18,440 per metric ton.
Indian primary nickel declined by 1.4% to $18.20 per kilogram.
The Stainless Monthly Metals Index (MMI) increased by 4.3% for this month’s reading, as stainless steel demand is likely to continue to grow in the years ahead.
According to International Stainless Steel Forum (ISSF) data, stainless steel melt shop production increased by 24.7% year over year to 14.5 million metric tons through the first quarter of 2021.
Most of the production increase came from Europe and the U.S., where production jumped by 11.0% and 9.7%, respectively. The only region that saw a production contraction was China. China’s production fell by 0.5% to 8,198,000 metric tons.
This coincides with a report by Precedence Research, in which it estimates the stainless steel market size to increase to U.S. $168.24 billion by 2027 from U.S. $106.84 billion in 2019.
Precedence anticipates a 57.5% increase over the eight-year period due to the growing preference for stainless steel over ordinary steel and its increasing application in pre-engineered buildings. Additionally, demand for steel from construction and automotive and transportation sectors is expected to keep growing.
In late March, the United Steelworkers union announced a strike at nine Allegheny Technologies Inc. (ATI) facilities. The union cited “unfair labor practices” in its announcement of the strike.
Over six weeks later, the labor stoppage has yet to reach a conclusion.
Meanwhile, late last month, ATI reported its first-quarter financial results. The firm reported a net loss of $7.9 million for the quarter, compared with a net loss of $1.1 billion in Q4 2020.
In Q1 2020, the firm reported net income of $23.6 million.
In its earnings report, the firm expressed “disappointment” in the union’s decision to strike.
“While we are incredibly disappointed that the USW leadership decided to strike our Specialty Rolled Products locations beginning in late March, we remain committed to our business continuity plan to safely operate in a way that allows us to deliver to our customers on our quantity and quality commitments during this strike,” President and CEO Robert S. Wetherbee said. “Our operating teams are committed to minimizing the operational interruption and financial impact from the strike as we seek to reach a fair and equitable settlement with our striking workers.”
Meanwhile, in a bargaining update released Thursday, May 13, the union said it had not heard back from ATI management regarding a proposal it made May 6.
“The issue of profit sharing has been a subject of discussion throughout our negotiations with ATI,” USW said in the statement. “We have shown the company that we are willing to be flexible, but the current offer by ATI eliminates profit sharing and replaces it with 3% wage increases in the 2nd, 3rd and 4th years of the contract. After going without a wage increase since 2014, obviously such an offer is unacceptable.”
Last month, the MetalMiner team hosted a webinar on commodities and buying strategies for bullish markets — this month, the team will zero in on the stainless steel market.
In last month’s 30-minute session, the MetalMiner team covered metals broadly. Participants weighed in via poll questions, including about their most budget-busting metals, among other questions.
For what it’s worth, 44% answered carbon steel. However, stainless steel came in second at 24%.
In short, stainless steel buyers are feeling the pain in what is a difficult market.
Stainless steel webinar, Thursday, April 29: ‘Turning Stainless Market Upheaval to Your Advantage’
Maksym Yemelyanov/Adobe Stock
In a webinar scheduled for 11:30 a.m. CDT,Thursday, April 29, the MetalMiner team will shine a spotlight on the stainless steel market.
The webinar, titled “Turning Stainless Market Upheaval to Your Advantage,” will features insights and tips for stainless steel buying organizations, particularly in what has been a tumultuous time for the market.
Meanwhile, as MetalMiner has reported previously, the United Steelworkers union in late March announced a strike at nine Allegheny Technologies Inc. (ATI) facilities. As of press time, the strike continued into its fourth week.
If you are a stainless steel buyer, you won’t want to miss this webinar, led by MetalMiner CEO Lisa Reisman, Vice President of Business Solutions Don Hauser and Katie Benchina Olsen, senior stainless analyst for MetalMiner.
The ATI strike has exacerbated the shortage of stainless flat-rolled supply in the US, Olsen says.
So, what options do buyers have in this market?
“In years past, imports were an option to alleviate the domestic supply shortage,” she said. “In today’s market, other parts of the world have increased stainless demand, too, and shipping options are constrained. Stainless buyers should be prepared for limited stainless supply through the rest of the year.”
During Thursday’s session, MetalMiner experts will share additional insights on the state of the stainless market and answer questions.
The United Steelworkers union’s strike at nine Allegheny Technologies Inc. (ATI) facilities continues into its third week this week.
As we noted late last month, the union announced the strike at nine facilities, citing “unfair labor practices.”
“We are willing to meet with management all day, every day, but ATI needs to engage with us to resolve the outstanding issues,” USW International Vice President David McCall said in a prepared statement March 29. “We will continue to bargain in good faith, and we strongly urge ATI to do start doing the same.
“Through generations of hard work and dedication, Steelworkers at ATI have earned and deserve the security of a union contract. We cannot allow the company to use the global pandemic as an excuse to reverse decades of collective bargaining progress.”
Meanwhile, ATI expressed disappointment in the move.
“Last night, ATI further improved our proposal in hopes of averting a work stoppage,” ATI spokesperson Natalie Gillespie wrote in an emailed statement. “With such a generous offer on the table — including 9% wage increases and premium-free health care — we are disappointed for this action, especially at such an economically challenging time for ATI.”
The Tribune-Review reported ATI has called for the union to allow workers to vote on the company’s contract offer.
Late last year, ATI announced plans to exit the standard stainless steel sheet market by mid-2021. As such, stainless buyers already had to develop alternative plans if they were ATI customers. The current ATI strike presents another point of disruption for buyers.
Katie Benchina Olsen, MetalMiner senior stainless analyst, indicated earlier this month that lost production from the strike would be difficult to fill.
“Neither NAS nor Outokumpu have the capacity to undertake filling in for the ATI strike,” she said. “My opinion is that we may see some manufacturers run out of metal or have to substitute with another stainless alloy or maybe even another metal.”
The United Steelworkers union Monday announced a strike at nine Allegheny Technologies Inc.(ATI) facilities, citing what it calls “unfair labor practices.”
The ATI strike, which began at 7 a.m. EDT Monday, marked the first at ATI since 1994, according to media reports.
In addition, USW spokesperson Tony Montana told MetalMiner the strike involves workers at plants in:
Pennsylvania in Brackenridge, Latrobe, Natrona Heights, Vandergrift and Washington
“We are willing to meet with management all day, every day, but ATI needs to engage with us to resolve the outstanding issues,” USW International Vice President David McCall said in a prepared statement. “We will continue to bargain in good faith, and we strongly urge ATI to do start doing the same.
“Through generations of hard work and dedication, Steelworkers at ATI have earned and deserve the security of a union contract. We cannot allow the company to use the global pandemic as an excuse to reverse decades of collective bargaining progress.”
USW said negotiations with ATI began in January 2021. The union claimed the company “sought major economic and contract language concessions” from its roughly 1,300 union members. Furthermore, the union said members have not had a wage increase since 2014.
Meanwhile, the union had announced its intention to strike Friday, March 26.
The Stainless Monthly Metals Index (MMI) rose by 4.3% for this month’s reading, as news of a supply deal by China’s Tsingshan Holding Group helped push the nickel price downward.
Sick of not finding good price indexes for stainless steel? Check out the MetalMiner stainless steel should-cost model — detailed price-per-pound info for grade, form, alloy, gauge, width, cut to length adders, polish and finish adders.
Nickel price falls on Tsingshan supply deal news
The nickel price, like most other base metals, surged through the first two-thirds of February.
The LME nickel price reached as high as $19,722 per metric ton as of Feb. 21.
From there, however, the price dropped, particularly after news of supply deals by China’s Tsingshan Holding Group.
“Nickel’s narrative has largely been predicated on a shortage of battery-grade metal driven by EV demand,” MetalMiner’s Stuart Burns explained earlier this month.
“However, Tsingshan’s supply contract and capacity announcements suggest there will be sufficient supply. As a result, the nickel market reflected a sharp rethink of the deficit view.
“Demand undoubtedly remains robust for nickel. Its medium- to longer-term outlook remains positive on the back of stainless and battery demand.”
A price drop at some point was expected.
“It’s expected that the market would see some price corrections,” MetalMiner CEO Lisa Reisman explained. “Now we are looking closely to see if prices break support levels or hold. Most of the base metals appear to have held onto their support, with the exception of nickel.
“However, the falling nickel price will not result in more availability or shorter lead times. In fact, more fabricators and OEMs have started to pursue import options to help alleviate supply chain hiccups.”
Stainless steel producers have been caught in a pincer movement over the last year of rising nickel prices but falling demand.
It is a counterintuitive situation until you factor in China’s stainless production. Chinese output rose by 4% in the third quarter of last year compared to the rest of the world, which fell by 9%. The disconnect between China and the rest of the world is driving a complex dynamic in the nickel market.
The result is rising LME inventory of refined metal while, at the same time, prices are pushing close to 17-month highs at $18,675 per metric ton, Reuters reported.
Historically, when China’s stainless producers are running hot they suck in refined nickel imports (much as they have done over the last year on aluminium and copper).
But in nickel’s case, the imports are booming for raw materials, nickel pig iron (NPI) and ferro nickel (FeNi), due in large part to Indonesia’s export ban on ores and the resulting investment made in NPI production in Indonesia by Chinese producers.
China’s imports of NPI and FeNi have boomed. Imports totaled 3.4 million tons in 2020, up 80% from 2019. Indonesia made up the lion’s share of those imports. China imported 600,000 tons from the country in 2018 and 2.7 million tons in 2020.
Ores and concentrates, by comparison, have fallen with the Philippines and New Caledonia unable to make up the shortfall. As such, imports have slumped by 30%.
The Stainless Monthly Metals Index (MMI) increased by 4.5%, as stainless flat rolled base prices continue to move upward due to extended lead times and limited domestic capacity (following a similar trend with steel prices).
Stainless steel producers raise prices
Stainless steel producers North American Stainless (NAS) and Outokumpu announced price increases effective for February deliveries.
Both producers announced a two-discount-point reduction for standard chemistry 304, 304L and 316L. For 304, the base price increase amounts to approximately $0.0350/lb.
Outokumpu diverged from NAS, as it increased all other 300 series alloys, 200 series and 400 series by reducing the functional discount by three points. In addition, Outokumpu also will be implementing a $0.05/lb adder for 21 gauge and lighter.
As the only producer of 72″ wide in North America, Outokumpu increased its 72″ wide adder to $0.18/lb.
Along with rising base prices, alloy surcharges are rising for the third month in a row. February alloy surcharges for 304 will be $0.8592/lb, an increase of $0.0784/lb compared to January.
Both NAS and Outokumpu are also revising their equalized freight rates, which take effect in March.
