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Nickel prices tied to Indonesia’s ban

Keywords: Tags  Nickel, scrap metal, stainless steel scrap, Institute of Scrap Recycling Industries, ISRI, Rey Mashayekhi

LAS VEGAS — Rising nickel prices continue to pose new challenges for end-users and stainless steel scrap companies, according to panelists at the Institute of Scrap Recycling Industries’ (ISRI’s) annual convention in Las Vegas, with the fate of the market inextricably linked with the “elephant” that is Indonesia’s nickel ore export ban.

The panelists at the “Spotlight on Nickel/Stainless” discussion cited several factors that have driven nickel prices to their highest levels in a year and impacted the mechanics of markets that are sensitive to price volatility. The London Metal Exchange’s cash nickel contract broke $17,000 per tonne ($7.71 per pound) April 10 for the first time since March 15, 2013. 

The base metal’s rally has been driven by supply concerns stemming from Indonesia’s raw materials export ban instituted in January, as well as potential sanctions on Russian material due to political instability
in Ukraine and Crimea. 

“The whole situation right now has a lot to do with” the Indonesian export ban, which has affected the Chinese nickel pig iron (NPI) industry’s access to nickel ore, Jason Schenker, president and chief economist at Austin, Texas-based research firm Prestige Economics LLC, said. If the ban is upheld “for a couple of years,” Schenker said, there will be “a lot of upside for (nickel) prices.”

“Nickel pig iron is the shale gas of the metal market,” Schenker said. “The spigot has been turned off for now.” 

Schenker added that he believed “any sort of restrictions on Russia” as a result of the instability in Ukraine “will be quite limited.”

Al Goodman, senior trader at McKeesport, Pa.-based stainless scrap processor ELG Metals Inc., also was on the panel and discussed the nickel market’s impact on stainless scrap supply and industry margins. 

“We’re seeing a pickup in demand and a lessening of margins, to the point where there are no margins,” Goodman said, noting that stainless steel mills are struggling to make money because of Chinese imports. Goodman added that mill discounts on stainless scrap are “close to historic highs” and that European-owned mills, in particular, have been reluctant to reduce discounts.

Among those mills is Outokumpu Stainless USA LLC’s operation in Calvert, Ala., which Goodman estimated is currently running at 60-percent capacity and will “probably” be operating at full capacity by the end of 2014. Goodman said he believed Outokumpu is “planning on closing facilities” in Europe to shift more production to the Calvert plant.

Goodman added that if the Chinese stainless steel industry “at some point has to turn to scrap” because of its inability to produce NPI, it would be “a huge game-changer” for global scrap markets.

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