Industry News

While the price of a nickel coin might be fixed at five cents, the price of the metallic element nickel and alloyed metals made with it—including stainless steel—is far from a fixed number.

As buyers and sellers of stainless steel can attest, the value of nickel and stainless alloys has been rising lately, and that ride up may continue for awhile.

In an April online column, MSN Financial commentator Jim Jubak writes that the booming metals markets may have already made most of the financial gains heading the way of investors and traders who lined up on the winning side—especially with copper.

The good news for scrap metal generators is, though, that pricing generally remains strong and that for some metals, such as nickel, it could get stronger yet.

Citing a report from Desjardins Securities, Jubak writes that in 2006, 2007 and 2008, the supply of nickel is expected to fall short of demand—and by some 20,000 metric tons in 2008.

"That’s a huge deficit considering that Desjardins put nickel inventory at just 5,418 metric tons as of March 30, 2007," writes Jubak.

For future pricing, this could mean that nickel will rise from an average of $10 per pound in 2006 to some $16 per pound this year. According to Jubak, investment analysts see nickel being priced anywhere from $13 to $17.50 per pound in 2008.

Chinese producers and users of nickel and stainless steel are likely to stay busy in 2008, which means manufacturers will pay more for stainless steel sheet and plate while also receiving more for their scrap.

A new study issued by the Specialty Steel Industry of North America (SSINA) accuses the government of China of having a policy of conferring preferred status on the stainless steel industry and providing it with a wide range of preferential treatment programs and direct subsidies.

The study details Chinese government support in the form of "tax refunds, discounted interest rates, funds for research and other policy support for major iron and steel projects utilizing newly developed domestic equipment."

The Chinese policy also calls for indirect support by, among other things, restricting foreign investment, discriminating against foreign equipment and technology and by providing various export credits. In short, according to the SSINA study, China’s steel policy is a primary example of the government’s attempt to manipulate the steel market and dictate industry outcomes by involving itself in decisions that should be made by the market.

At a recent metals industry conference, SSINA counsel David A. Hartquist offered remarks stating that, even though global stainless steel capacity exceeds demand, new facilities are being added around the world. He remarked that this new capacity is being funded through massive government subsidization, particularly in China.

"The U.S. stainless steel industry is modern, efficient and competitive," said Hartquist. He explained that the market during the last few years has been strong and most companies have had good financial performances. "SSINA members recognize, however, the importance of being able to address Chinese subsidies in the future should the need arise," Hartquist continued.

Both the speech and the Chinese Government Subsidies to the Stainless Steel Industry study can be found on the industry Web site: http://www.ssina.com/.

SSINA is a Washington-based trade association representing virtually all North American stainless steel and other specialty alloy producers.