Stainless Steel Me

With stainless steel production in its third successive year of decline, world production of refined primary nickel now is expected to decline 9.3% to 1.26-million metric tons in 2009, the International Nickel Study Group (INSG) predicts.

World nickel prices averaged more than $23/lb in early 2007 but have since fallen sharply, to around $5 this week as slowing global economic activity dampened demand for the metal, which is used to make stainless steel. However, stainless steel output will slump by 11% to 23.4 million metric tons this year from the 26.3 million produced in 2008, according to analysts at Macquarie Research.

The INSG now sees nickel production continuing the slide that resulted in a 2.1% dip to 1.39 million metric tons in 2008 from a near-record 1.42 million tons in 2007.

World primary nickel usage in 2008 started strongly, but as the global economic crisis unfolded, including tightening of credit facilities resulting in lower nickel prices, demand and production of stainless steel declined from the middle of the year, the commodity association says. “It remains unlikely that any substantial improvement (in demand or prices) will take place this year,” according to the INSG forecast.

Nickel consumption fell 1.5% last year to 1.29 million metric tons, and is expected at this point to decline to 1.18-million metric tons in 2009. That would result in a market surplus of around 80,000 metric tons.

The INSG last October forecasted a refined nickel surplus of some 110,000 metric tons but analysts now say the difference between supply and demand has been narrowed after nickel miners responded to weak prices and demand by curtailing production at mines around the world.

The INSG says it “recognizes that the current global economic crisis has created a large degree of uncertainty in the global market, and its impacts on both the supply and demand for nickel are not fully known.” So, there could be more production disruptions, such as the ore-processing problems at Finnish nickel Talvivaara, or further declines in purchasing by stainless steelmakers.

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