World Nickel Market Affecting Stainless Steel

How does the current nickel market relate to stainless steel pricing?

On March 8^th, 2022, the nickel market exploded.  Nickel is traded on the London Metals Exchange (LME) and for the past decade or so, it has hovered in the $10,000-$20,000 per ton range.  On March 8^th, it surged to over $100,000/ton in a single day.  This unprecedented rise caused the market to be halted and it has been chaotic ever since. 

As a stainless-steel manufacturer, we follow the price of nickel closely, but the question asked by the public is, why?  History has shown the pricing of stainless closely follows the cost of nickel. This is due in part to the fact that while nickel may make up a small percentage of stainless in mass (8% in 304), it contributes upwards of 60% of the cost.  Obviously, it’s quite troubling to see the price of Nickel jump to levels as it did on March 8^th, when we know how that cost can drive stainless steel pricing to unprecedented levels as well.

Russia has a large share of the world nickel reserves and combined with the isolation from the world due to the war in Ukraine, could also influence pricing.  Nickel reserves are held by a few key countries and the top five reserves and percentages of the world share are as follows:

Indonesia – 21 million tons (22%)

Australia – 20 million tons (21%)

Brazil – 16 million tons (15%)

Russia – 6.9 million tons (7%)

Cuba – 4.8 million tons (6%)

The top nickel producing countries are Indonesia, Philippines, Russia, New Caledonia, Australia, Canada, China, Brazil, and the United States.

The other driver that has inflated the demand for nickel is the shift to electric vehicles and the need for lithium-ion battery cells.  The critical ingredient in lithium-ion battery cells is nickel.  With surging gas prices due to the war in Ukraine, the demand for electric vehicles is also increasing even more than it already had been.  Almost every auto manufacturer in the US has made bold investments in electric vehicles and obviously that is going to push the nickel demand skyward.  

What does all of this mean with regards to the future of stainless-steel pricing?  Well, it’s hard to say.  Since nickel prices historically drive the stainless-steel market prices, it’s easy to infer that it’ll push stainless steel prices upward as well.  However, what that correlation will be, is difficult to predict with any accuracy.  The LME price of nickel is still very volatile and while it has settled back to roughly $33,000/ton which is still quite higher than what it was prior to March 8^th and is compounded by the lack of trust in the LME that can be seen in the trading volumes.  Hopes are that it’ll continue to settle back as it was predicted to decrease in 2022 prior to this debacle.  The wild cards are Russia’s 7% market share and how that might change things, the demand for EV batteries and how simple supply and demand plays out. 

The stainless-steel market has been and will be very difficult to navigate and will remain muddy for a while.  The best bet for customers is to try to lock in your prices as you need it with quick purchases.  Stainless steel pricing may be like the stock market ebbs and flows and could prove to be truly a roller coaster ride for the remainder of 2022 and potentially beyond.  We at Kusel will do our best to keep you informed with the most up to date information to ensure you can make the best decisions and keep your customers informed.

Sources:

https://www.cnbc.com/2022/03/08/nickel-price-surge-could-threaten-automakers-ev-plans.html

https://en.wikipedia.org/wiki/List_of_countries_by_nickel_production

https://www.reuters.com/markets/asia/view-lme-suspends-nickel-trading-day-after-price-surge-2022-03-08/

https://tradingeconomics.com/commodity/nickel

https://markets.businessinsider.com/commodities/nickel-price

http://www.estainlesssteel.com/nickel.shtml

https://investingnews.com/daily/resource-investing/base-metals-investing/nickel-investing/top-nickel-producing-countries/