ISRI 2019 Commodities Roundtable Forum: Shining nickel
Fred Penha of INTL FCStone (at podium) discusses the rise of nickel prices during the ISRI Commodities Roundtable Forum.

ISRI 2019 Commodities Roundtable Forum: Shining nickel

Unlike other base metals, nickel has seen its value increase in the last year.

September 16, 2019

It’s been a challenging year for base metals. Pricing for ferrous scrap has been trending downward for much of 2019, while the same can be said of copper and aluminum scrap. Nickel, on the other hand, has made gains in pricing, said Michael Friedman, president of Sustainable Scrap Management Corp., Louisville, Kentucky. Friedman moderated the Nickel Stainless Roundtable during the 2019 Institute of Scrap Recycling Industries (ISRI) Commodities Roundtable Forum Sept. 11-13 in Chicago.

In January of 2019, nickel sold for an average price of $11,450 per metric ton on the London Metal Exchange (LME). By August, that price had increased to $15,670. 

“We’ve had a real ride with nickel,” Friedman said.

Fred Penha, a base metals trader for INTL FCStone, headquartered in New York, said nickel pricing is up 70 percent year to date, while gold is up 18 percent. However, he added, “The rest of the base metals complex is essentially down 5 to 10 percent.”

Even compared with other commodities, such as gas and oil, Penha said, “nickel is by far the best performing commodity bar none.”

The growth in nickel pricing and demand, however, has not been driven by real consumption, he said.

Penha mentioned that the Indonesian ban on the export of nickel ore, which was moved forward from 2022 to January 2020, has affected the market. The country attempted a similar ban in 2014, causing nickel pricing to run up. Indonesia then reconsidered, and nickel pricing “came crashing down,” he said.

Additionally, the introduction of a nickel futures contract on the Shanghai Futures Exchange (SHFE) in 2015 “has thrown a new element into nickel pricing,” Penha said. “We believe that part of the driver for nickel prices are folks speculating in China. Nickel is actually one of the preferred financing vehicles for speculating.”

Barry Hunter of Hunter Alloys LLC, Boonton, New Jersey, said he also looks at stocks on the LME—where they are and what they are—in relation to the speculation about the growth of electric vehicles because their batteries will require a great deal of nickel. He added that nickel sulfide or briquettes will be used to produce these batteries. “You cannot use nickel plate in making that particular product."

Hunter continued, “If you look at the stocks on the LME, 90 percent of that stock is in the form of briquettes. And where is it? It’s in Asia."

While he said nickel plate stocks on the LME in Asia are going down, briquette stocks are not. He explained that he believed this indicates that Chinese traders are preparing for future growth in electric vehicle production in that country.

Penha added that because the SHFE warehouses are located only in mainland China and the LME warehouses are all over the world with the exception of mainland China, they are good proxies for demand in China and globally, respectively.

China produced 26.7 million metric tons of stainless steel in 2018, or 53 percent of the world’s 50.7 million metric tons of production, ISRI Chief Economist and Director of Commodities Joe Pickard said. In 2001, China produced a mere 730,000 metric tons of stainless.

“To say that China has revolutionized the stainless market would be something of an understatement,” Pickard said. He added that China’s stainless production “dwarfed” U.S. production, which was 2.8 million metric tons in 2018.

“Trade is a hugely important part of the equation both on stainless and om stainless scrap,” Pickard said. In the NAFTA (North American Free Trade Agreement) region, 570,000 tons are traded annually, while nearly 554,000 tons of stainless steel products moved from Asia to the NAFTA region, and 436,000 tons moved from Europe into the North American market.  

“Because there is so much volume of material moving into and out of the NAFTA region,” Pickard said, “it’s not terribly surprising the number of anti-dumping” cases that have been introduced in the U.S. He added that these trade cases have been important for domestic market development.

Taiwan is the largest export market for U.S. stainless scrap, Pickard said, with demand having increased by more than 67 percent year to date through June compared with 2018. India is the next largest market, with demand having grown by nearly 88 percent year to date through June compared with the same period in 2018. 

China’s imports of stainless steel scrap from the U.S., however, declined from 26,528 metric tons in 2018 to 5,453 metric tons through June of 2019. This represents a nearly 58 percent decrease year to date through June, according to Pickard’s presentation.