The drumbeat of caution heard during the Bureau of International Recycling’s fall meeting was echoed during the Stainless Steel & Special Alloys Committee report. The conference was held Oct. 25-26 in Dublin, Ireland.
During the presentation, Mark Parker of the UK-based mining and metal industry consulting group Brook Hunt, said that, in terms of nickel market forecasting, ‘the risks are even greater on the downside than many people believe’. To the extent, indeed, that he expected the nickel price to head below $2 per lb where it would ‘act as a mechanism to cut supply’.
Parker recalled that the nickel price had remained below $2 per lb for 23 consecutive weeks during the second half of 1998 before an adjustment in production had finally led to a noticeable improvement in demand and a price recovery in the first quarter of 1999. On this occasion, he expected demand to decline through the first half of next year and post ‘modest’ growth the entire year. Stocks at the end of 2001 would still be high relative to anticipated demand for next year.
Production cuts were ‘inevitable’ but, if taken gradually, the decline in stocks would ‘dampen any price recovery’. Furthermore, Parker did not expect Russia to cut nickel production, thus pushing the burden on to the West.
Parker also attempted to explain why supplies of stainless steel scrap were so limited, pointing to lower stainless demand, a fall of almost 40 percent in Eastern European supplies, raw material de-stocking at the mills, and the withholding of material in the supply chain due to low prices and reduced investment activity. In the first half of this year, U.S. and German scrap generation declined by 13 percent and 17 percent, respectively.
Parker’s market projections were challenged by Ivor Kirman, president of the Nickel Development Institute, who argued that low stainless steel prices historically led to a surge in application growth. Underlining the important influence of investors and speculators on market developments, he suggested low prices and low interest rates could mean excess inventory finding buyers with relative ease.
Kirman outlined the increasing emphasis placed by NiDI on recycling issues and called for the formation of a joint working group - comprising representatives from the nickel and stainless steel industries, BIR and the International Nickel Study Group. This should be done with a view to the annual development of ‘an authoritative statistical understanding of nickel production, use and recycling which can act as a base for both communication and performance measurement’.
Michael Wright, chairman of the Stainless Steel & Special Alloys Committee and with ELG Haniel, explained that, since the previous BIR meeting in May, stainless steel scrap had enjoyed good demand but substantially reduced availability. Most consumers had been forced to reduce their percentage scrap charges by up to 20 percent per melt. Such a supply/demand scenario would normally mean higher raw material prices but the drastic fall in nickel values had instead created ‘an almost nightmare scenario for stainless steel processors and traders’.
Barry Hunter, BIR President, reporting for the United States, said consumer markets and decent demand existed for stainless steel scrap - but margins were not equally positive.