Indonesia sees growth in volatile stainless market

Nickel price volatility has been ‘pretty intense’ over the last couple of months and that won’t change any time soon, according to market analyst Jim Lennon. He projects that the LME cash price will be around US$ 16 000 per tonne next year, up significantly from the US$ 13 800 price forecast for 2018.

The ‘booming’ world stainless steel sector saw its output increase more than 6.5% last year. And yet, it seems a ‘turning point’ has been reached because the growth rate shows ‘signs of peaking’, said Jim Lennon of Macquarie Group at the Bureau of International Recycling’s convention last week. The market analyst predicts growth will be around 3.5% this year, and maybe 2.5% in 2019.

The good news is that nickel use in batteries is growing at 30-40% per annum ‘from a low base’ – mainly in electric vehicle applications. Regarding global nickel use in stainless steel production, Lennon projected that the nickel in scrap component will increase from 904 000 tonnes in 2017 to 945 000 tonnes this year and perhaps 983 000 tonnes in 2019.

The rise of Indonesia

‘Overall, global industrial production of stainless steel is now slowing’, Lennon told delegates in London. ‘There is huge growth in China and Indonesia. However, prices in these nations are forced lower by overproduction.’ What’s more, Chinese mills are facing the onslaught of low-cost Indonesian stainless steel. ‘And now Taiwan feels the heat,’ the analyst added, explaining that a good 48% of Indonesia’s material was being diverted away from China to Taiwan this Summer.

Indeed, Indonesia has emergenced as a powerful player in the nickel and stainless steel markets. The country has been ‘a very large contributor’ to stainless steel production growth over the last 12 months thanks mostly to the China-based Tsingshan company.

Tsingshan added upwards of 2 million tonnes of annual stainless melt capacity in Indonesia last year. It will add another 1 million tonnes during the second half of 2018. More than 80% of its exports had traditionally been shipped to China but Taiwan has now become the leading importer.

On the whole, Indonesia is believed to account for a quarter of global nickel supply in 2018.