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Prices and stainless steel production recovering

Booming Asian output and economies emerging from lockdown suggest a good 2021 for scrap traders.

Although primary nickel prices have underperformed as compared to other major base metals this year, improving stainless steel output, electric vehicle sales, and commodity investor sentiment are contributing to firmer prices across the nickel-stainless supply chain. After having bounced around US$ 16 000 per tonne late in the first quarter, nickel prices at the London Metal Exchange but were back up around US$ 18 000 per tonne in early May as nickel stocks in LME warehouses were being drawn down.

For stainless steel scrap processors and exporters, transportation bottlenecks are still at a critical level given the on-going challenges securing shipping containers and vessel space but the current recovery in prices and output bodes well for scrap demand going forward.  

Booming Asian output

According to estimates from Macquarie Research, global stainless steel production surged to 14.9 million tonnes in the first quarter of 2021, up nearly 26% from first quarter 2020 output of 11.85 million tonnes. Not surprisingly, China and Indonesia have been the main drivers of growth this year. Macquarie estimates Chinese stainless steel production in first quarter of 2021 rose by 40% year-on-year to more than 8.6 million tonnes, while Indonesian production more than doubled to 1.06 million tonnes over the corresponding period.

The 2021 rebound follows a rare contraction in global stainless production last year as Covid-induced shutdowns took a toll on production levels, particularly in Europe and the USA. According to the latest figures from the International Stainless Steel Forum in Brussels, global stainless meltshop production declined 2.5% in 2020 to just under 50.9 million tonnes as output in the United States plunged 17.3% and European stainless production declined 7.1%.

As economies began to loosen Covid restrictions in the second half of last year, global stainless steel production advanced from 11.6 million tonnes in the second quarter of 2020 to 13.5 million tonnes in the third quarter and 14.1 million tonnes in the fourth.

Battery demand important

In addition to the rise in global stainless steel production, rising electric vehicle and battery sales have become an increasingly important source of demand. Global electric vehicle sales rose by more than 40% year-on-year in 2020 to approximately three million units according to estimates from the International Energy Agency.

Looking ahead, Fastmarkets cites a Boston Consulting Group report that projects EV sales will expand 140% this year and will account for more than…

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