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Market fundamentals supportive for scrap demand

Nickel prices remain buoyant as global melt shop production rose by nearly a quarter in the first six months of 2021, year-on-year.

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Nickel prices have exhibited heightened volatility in recent weeks but prices remain on an upward trajectory this year. At the London Metal Exchange, LME three-month prices traded as high as US$ 21 425 per tonne in late October and were up 17% for the year-to-date as of early November. This year’s price gains have been accompanied by falling nickel stock levels in LME warehouses, which declined from more than 260 000 tonnes in April to less than 140 000 tonnes currently.

The rise in nickel prices and drawdown in stocks has been attributed to continued nickel market supply deficits and rising stainless steel demand as the global economy recovers. The International Nickel Study Group estimates global nickel demand exceeded supply by more than 134 000 tonnes during the first half of the year. Although new Covid outbreaks, deteriorating supply chain bottlenecks and rising inflation levels remain problematic, positive nickel and stainless steel market fundamentals are signalling healthy future demand for stainless steel scrap.


According to the latest figures released by the International Stainless Steel Forum, global stainless steel melt shop production increased nearly 25% year-on-year in the first half of 2021 to more than 29 million tonnes. China continues to be the dominant global producer of stainless steel, accounting for 56% of global production, or 16.2 million tonnes, during the first half of 2021 – up 20.8% as compared to the corresponding period last year.

Significant year-on-year production gains during Jan-Jun 2021 were also registered in Europe (+20.3%), the United States (+18.75), Asia excluding China and South Korea (+25.6%), and all others (+53.7%). However, energy cuts to China’s manufacturing sector during the second half of 2021 could restrict future gains.

Macquarie Research reports ‘several stainless steel mills in China are being forced to cut production sharply due to power shortages/pollution controls’. As reported by the World Steel Association, Chinese crude steel production in September 2021 plunged 21.2% as compared to one year ago.

For stainless steel producers outside of China, output gains have largely remained on track as evidenced in recent corporate financial reports. Finland-based Outokumpu Oyj announced its stainless steel deliveries increased from 1.5 million tonnes during Jan-Sep 2020 to 1.8 million tonnes during Jan-Sep 2021.

Over the corresponding periods, the company’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) surged from EUR 121 million to EUR 695 million this year while recycled content remained above 90% according to their Jan-Sep financial report.

Similarly, major stainless steel producer Acerinox reported that its stainless steel melt shop production during Jan-Sep 2021 increased to 1.93 million tonnes, up from 1.54 million tonnes during the first nine months of 2020. Trade restrictions imposed by Western economies have helped to shield stainless producers from import competition.

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