Why does Nickel Prices Affect Stainless Steel?

When you are a supplier of stainless steel then it is important to keep a check on the price of nickel but why is it so important. Within this article we are going to explain the reason as to why the price of nickel affects the price of stainless steel?

Believe it or not the worldwide nickel market depends upon stainless steel production and the pricing of stainless steel will be affected by the worldwide price of nickel. A massive two thirds of all nickel which is mined will make its way into stainless steel.

This was a metal discovered in 1751 and at this early stage it had little value to the industry until 1820 when Michael Faraday discovered that in adding Nickel to iron would result in the iron being strengthened. In 1885 nickel steel was produced and then used in the U.S. Military because it strengthened their weaponry. Since then nickel was a critical commodity in the time of warfare but today it is nickel and cobalt which are used to create super alloys.

In the 20th Century warfare has increased and thus the overall demand for nickel has increased and caused a number of spikes with regards to nickel pricing. US plants were in a position during the Korean conflict where they couldn’t produce enough nickel in order to keep up with the demands. Following this the Government took over and controlled the production of nickel within the US right until 1957.

It was in 1957 when the Government relinquished control after the cease fire document was signed. Bu this time Canadian producers accounted for 48% of the world nickel production but then strikes in 1969 caused a decrease in Canadian production and so new countries like Australia, New Caledonia and the Dominican Republic came on board and started their own processing plants.

When the other countries came on board Canada began to lose their domination of the nickel market and thus they lost their ability to be able to set nickel pricing. As the demand increased so did the price but then a Labour strike caused a massive hike in prices in 1978 and in 1979 nickel became the seventh metal to be traded on the London Metal Exchange.

This was a huge step and would mean that nickel prices would be set according to worldwide supply and demand. In just two years a 33% price increase was seen and then when the Labour Strike ended a surplus of nickel occurred and prices fell. In 1986 the prices of nickel were as low as it had been in years and many of the nickel producers had ceased production.

Stainless steel usage increased in 1987 and demand exceeded supply; The Dominican Republic government placed a massive duty upon any exported nickel which caused shipments to be cancelled. In April 1988 nickel prices soared to an all-time high and although demand was strong the producers were able to catch up and just as quick as the prices soared they came back down to earth once more.

In 1991 the Soviet Union fell and this meant there was a need for more nickel to be produced and a new producer to come on board. Norilsk Nickel was then the world’s largest producer of nickel and they started to export this in order to service demand. Although he was exporting heavily the demand for nickel in the military decreased and with this price decreased too!

The only surge happened in 1995 when an explosion and fire at a power plant meant Norilsk’s ability to produce and ship nickel was hindered. At the same time a major earthquake occurred in japan and thus there was a demand for stainless steel for reconstruction purposes. But the rise in price of stainless steel would be driven down once more when a Far East economy would drive down the prices as demand fell.

Then as if things weren’t complicated enough in 1999 there was another rebound in stainless steel and nickel producers were caught off guard. One of the Canadian companies actually ended up shutting down because of a strike and couldn’t re-open closed mines because of financial issues. Other companies had to shut too and with Norilsk unable to ship nickel because of the lengthened arctic freeze lasting longer than usual demand exceeded supply.

Prices increased once more until production caught up and in 2000 prices peaked before falling again in 2001. Another strike brought the prices up in 2003.

Although stainless steel products such as stainless steel wire, stainless steel banding and stainless steel strip coil are heavily made from chromium, nickel is less abundant and more volatile. Throughout history the pricing of stainless steel heavily follows the price of nickel. It does however make up a small percentage of stainless steel in mass with 8%in 304 it contributes upwards 60% of the cost.

The U.S are now 100% dependent on foreign imports and scrap as these are the two main ingredients of stainless steel since it sold its stockpile of nickel in 1999. Watch this space and ensure you watch the nickel prices as usually if they increase so does the price of stainless steel.

For more information then please contact BS Stainless on+44 (0) 1254 681112 or email info@bsstainless.co.uk.

16th April 2012, 15:07
Page updated 16th Apr 2012, 15:07
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