Nickel & stainless steel: supply worries drive prices higher

Russia produces 9% of mined nickel and 6% of refined nickel so international measures in response to the invasion of Ukraine could hit this vital market.

In anticipation of global nickel supply disruptions resulting from the Russian invasion of Ukraine, primary nickel prices hit the highest levels seen in a decade in late February 2022. At the London Metal Exchange, nickel cash prices traded above US$ 26 000 per tonne following the invasion, the highest level since 2011.

With nickel and other stainless steel raw material inputs already in short supply – nickel stocks in LME warehouses have declined by more than two-thirds since early 2021 – stainless steel and scrap prices could be pressured higher amid growing stainless demand.     

Short supply

According to estimates from Fastmarkets MB, global nickel demand exceeded supply by demand by 155 000 tonnes in 2021 and is forecast to record a supply deficit of 93 000 tonnes in 2022. At the same time, nickel stocks in LME warehouses have dropped from more than 260 000 tonnes in the first quarter of 2021 to just over 80 000 in February 2022.

The decline in primary nickel availability has been accompanied by strong demand growth from both the stainless steel and electric vehicle battery markets over the last year. Macquarie Research estimates global electric vehicle sales increased 102% in 2021 ‘as sales soared towards the end of the year in China and Europe’.

However, investors have become increasingly concerned that any sanctions imposed on major Russian nickel producers Rusal and Nornickel would further compound global nickel market tightness.

Russia reportedly accounted for 9% of global mined nickel production and 6% of refined nickel production last year, according to data from the International Nickel Study Group. Even with rising nickel pig iron production levels in Indonesia, any interruptions in the supply of Russian nickel to global consumers would not only have significant implications for nickel availability and pricing, but for stainless steel and stainless scrap markets as well.

Healthy demand

As the global economy continues to recover from the Covid-19 pandemic, stainless steel output and consumption have been on the upswing. According to estimates from Macquarie, world stainless steel meltshop production increased 13.6% in 2021 to nearly 59.5 million tonnes. As stainless steel prices and production levels have increased, major producers are reporting record corporate results.

Outokumpu president and ceo Heikki Malinen reported to investors that ‘We delivered our best annual financial results in recent history (in 2021) with adjusted Ebitda exceeding the remarkable milestone of EUR 1 billion. In the strong market environment, our mills have been running at full capacity.’

Read the full market analysis nickel & stainless in the upcoming issue!