The steady increase in global demand for stainless steel scrap has not been reflected in the price of nickel.
Given that nickel is used in making stainless steel, an overabundance of the former being mined in Asia has affected its price.
The price of nickel was great in early December 2016, fetching $11,675 per metric ton at its peak. At the beginning of 2017 however, the prices were strong but had declined to $9,375 by the end of January. The price continued to decline until around early July. Prices rose until early September before dropping again. The price stood at $11,665 as of Oct. 17.
Why has the price fluctuated so much?
At the ISRI2017 convention in New Orleans in April, Joe Pickard who is the chief economist and director of commodities at ISRI spoke about the flows of nickel and stainless steel.
The flow of nickel closely correlates to the price of nickel, Pickard said. The more that nickel flows, the better the prices are. Recent price drops stem from China’s decrease in scrap imports. China’s share of the global import market for stainless steel has dropped to 6% but it still has a major influence on the industry and price.
Historically China imported large amounts of stainless steel scrap from the US. But it has recently started getting more of its materials through nearby countries in Asia or from mines that produce nickel. The overabundance of nickel has led to China choosing to produce new over recycling old.
On top of that, China is also importing more nickel pig iron from Indonesia and the Philippines. The acting secretary of the Department of Environment and Natural Resources in the Philippines, Regina Lopez, had been holding China back.
Lopez had ordered 28 of the 41 mining companies in the Philippines to shut down earlier in the year due to alleged violations of environmental regulations. When her confirmation to become the official secretary got rejected, the price of nickel dropped right after.
The price of nickel has rebounded despite the increased production from mines.
As far as stainless scrap goes, market leaders have a somewhat optimistic outlook given that the demand for stainless scrap is high. They say that the US market is still aggressive but will face some major challenges through the rest of 2017.