Stainless Steel Prices & Nickel News, Prices, LME Nickel Pricing, Stainless Steel News – Molybdenum – World Metal Prices and Market Conditions
This article is meant to be informative and in no way a forecast of what we think prices will do. In fact, by constantly monitoring the “experts”, it has become obvious to anyone that follows the market, that what we have witnessed over the past few years is unprecedented in history, and therefore, completely unpredictable. Four years ago, China was not in the top 3 of the world’s stainless steel producing nations. By the end of this year, it may become the world’s largest. In 2002, it became the world’s largest consumer of stainless steel, after 10 consecutive years of 17% growth.
In 304 stainless steel, nickel makes up 8% of the total raw material ingredients, but due to its cost, makes up to 60% of the raw material cost – in a normal market. If you want to know where stainless prices are going, watch the price of nickel. Nickel has gone from $3.00/lb in 2002 to an average of $6.69/lb last year to current prices in the range of $14-15/lb. So why the climb? Simply put, worldwide producers of nickel were caught off guard by the demand in China, coming alongside a worldwide boom in stainless steel demand. Much of the nickel used in stainless comes from scrap and after three years of record prices, surplus scrap has long since disappeared. Opening a new nickel mine to take care of this increased demand is about a 10 year project, from discovery to production. And all worldwide producers are currently making as much nickel as they possibly can to take advantage of record prices. Supply is so tight that the slightest news of disruption can cause an increase in the market – which is highly speculative and has become driven by fund market investments. Just this last week, two mega mines being built in Australia and New Caledonia announced cost overruns of a billion dollars each, and more importantly to consumers, delays of potential production to at least 2008. That leaves 2007 as another potentially tough year for prices. Any labor strikes, any emergency shut-down’s, any disruption of any kind, will mean bad news for those waiting for prices to come down.
The one factor hanging over the entire story, is how much of the current trading price is due to market fundamentals, and how much of it is due to speculative market forces. Nickel inventories are lower than they were this time last year, and in many parts of the world, stainless steel producers are running flat out. But in reality, there really is no shortage of nickel. If you need it, you can find it. It is entirely realistic to see the world in the same shape as it is now, and prices trading for double what they were in 2002 – in the $6/lb range. But current prices are over double that range.
Trading is like climbing a mountain. The higher you go, the harder it is to breathe. On a mountain this is caused by lack of oxygen. In trading, it is more a lack of risk tolerance, based on a past experience of getting burned. Will the market forces stay bullish, or turn bearish on you, and how much are investors willing to gamble on their hunch? What no one knows yet, and only time will tell us, is where on this particular mountain we are. Are we near the peak? Or is there still more mountain to climb? Stay tuned.