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.
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Increasing stainless steel production, demand
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.
The U.S. Department of Commerce, Enforcement and Compliance reported in its U.S. steel import monitor that steel imports nearly doubled in May from the 18-month average of 60,800 metric tons to 118,000 metric tons.
Taiwan accounted for 11% of the total imports for May, followed by India at 4.6%. Meanwhile, the U.S. and Europe struggled with a supply shortage.
Base price and surcharge increase
Contract buyers should prepare for large increases in base prices and extras for the next contract period. That is especially true for any alloy that is not 304, 304L or 316L.
Contracts sourced with Outokumpu 201, 301, 201LN and 301LN will pay higher base prices than North American Steel (NAS). Although there is still an advantage to using lower nickel options than 304, the savings gap continues to narrow.
Alloy surcharges are increasing in June. NAS’ June alloy surcharge for 304 is $0.9612/lb, an increase of $0.0473/lb compared to May.
Chinese economic recovery and nickel
According to the Nickel Institute, nickel is expected to play an important role in China’s 14th Five-Year Plan.
Although not mentioned by name, nickel and nickel-containing materials will likely be necessary as China moves away from high-velocity growth and instead moves toward high-quality growth. Specific emphasis on manufacturing and infrastructure growth will further expand demand for the many forms and uses of nickel, including stainless steel, industrial chemicals and metal alloys.
Nickel will likely attract new demand from the development of the Strategic and Emerging Industries (S&EIs) which includes “new energy, new materials, high-end equipment, new energy vehicles (NEV), aerospace and aviation, as well as offshore engineering equipment.”
The five-year plan expects that “the S&EIs have the shared mission to contribute 17% of total GDP. Among them, NEV is the vanguard to achieve 20% penetration rate.” The use of high-nickel cathode technology used in the batteries of some new energy vehicles is important to note.
Moreover, in the new energy industry, hydro and offshore engineering projects could further increase nickel demand because of their need for durable and corrosion-resistant materials.
Actual metals prices and trends
The Allegheny Ludlum 304 stainless surcharge ticked up by 5.3% month over month to $0.99 per pound this month. Meanwhile, the Allegheny Ludlum 316 surcharge held flat at $1.30 per pound.
Chinese 316 cold rolled coil rose 6.8% to $3,925 per metric ton as of June 1. Meanwhile, 304 cold rolled coil climbed 10.7% to $2,794 per metric ton. Chinese primary nickel surged by 4.6% to $20,988 per metric ton.
LME three-month nickel jumped 1.9% to $17,843 per metric ton.
Indian primary nickel increased by 3.2% to $18.45 per kilogram.
Stop obsessing about the actual forecasted nickel price. It’s more important to spot the trend.