Although much of the talk in the scrap industry has been on the high wire act displayed by copper, the nickel market has been a commodity that has far outstripped any historical norms. And, by presentations given by several speakers at the recently concluded ISRI National Convention, the future could continue to push the nickel to even greater heights.
Dr. Mo Ahmadzadeh, president of Mitsui Bussan Commodities, touched on the fundamental realities driving the nickel market. A key, as it seems like in most every other base metal, has been the positioning by China. Ahmadzadeh notes that China needs stainless, but is shifting grades and exporting more.
Looking at the statistics for the metal, last year’s worldwide stainless steel production increased by 13.5 percent to 28.1 million metric tons. Further, over the next three years stainless steel production is expected to climb at a 5 percent per year rate.
Responding to the surging demand for nickel Ahmadzadeh noted that there are seven large projects that have a chance to be developed in the next four years, bringing around 250,000 additional metric tons on the market.
Meanwhile, the surge in nickel prices has resulted in some consumers looking to blend more pig iron and/or scrap in the mix. However, Ahmadzadeh says that scrap supplies are presently capped.
The result is that with surging demand and not enough new capacity deficits are expected to continue for the foreseeable future.
An even more bullish outlook came from Jason Schenker, with Wachovia. While acknowledging that the growth for nickel will be lower this year than last year, business should still be good. This, despite his opinion that the U.S. economy hit a "soft patch" during the first quarter of the year. However, despite some softness during the first quarter, he expects to see the economy "picking up in the back half." Further, Schenker feels that the global nickel growth will be above trend, with growth likely to continue."
A key driver for a continuing improved nickel market is greater focus on energy efficiencies and the resultant trend toward an improved environment.
The growth in the use of hybrid vehicles is one area that is helping boost nickel demand. The number is expected to continue increasing.
One potential downside to the soaring price for nickel is the talk about some consumers looking to substitute other materials, perhaps a lower grade of stainless. While there have been some moves to incorporate more 200 series stainless steel in some applications, the opinion expressed is that there still will be a need for many consumers to continue using the higher-value 300 series of stainless steel for its high corrosion resistance and malleability.