Rising Nickel Costs Squeeze Stainless Steel Producers’ Margins

Rising nickel prices have lifted the input costs for most stainless steel producers, significantly, in recent months. In many parts of the world, however, suppliers have been unable to pass the total amount of this increase on to their customers. The steelmakers, therefore, are forced to absorb the rising price of raw materials, thus cutting – or eliminating – their profit margins.

Only in North America have recent increases in alloy extras been fully applied, without cuts in basis values. This may become more difficult to sustain, in the coming months, as surcharges continue to rise, but end-user demand remains modest.

The price of nickel has been pushed up by predictions of future supply tightness. Consumption will be boosted by the metal’s use in batteries for the growing number of electric vehicles. Fears of possible shortages were raised, recently, by confirmation of an imminent ban on nickel ore exports, by the authorities in Indonesia. Although outside parties have announced plans to invest in nickel refining facilities in Indonesia, the ban will result in reduced supply, from the country, in the short-to-medium term.

Demand for stainless steel, conversely, is rather subdued. Trade actions, by the United States, have slashed the volume of shipments – of steel, and manufactured goods – from China, and other Asian countries. In turn, this has negatively affected the ability of consumers, in these emerging economies, to buy goods from prestige suppliers in many developed countries.

Producers, particularly in the traditional stainless steelmaking regions, continue to struggle with growing global excess capacity. European mills find it increasingly difficult to compete with price offers from Asia, for commodity grades. However, they may receive some temporary respite, in the near future, as the EC Safeguarding quota tonnages for several stainless steel product forms are projected to be exhausted, before the end of the quota period.