A detour for nickel

Stainless steel continues to shine as the foremost consumer of the world’s primary and scrap nickel resources. A global shift toward electric vehicles (EVs), powered in part by nickel-containing batteries, however, could make a dent in the stainless industry’s dominant presence.

The growth of the EV battery market was one of several topics speakers and attendees at ISRI2019, the annual convention hosted by the Washington-based Institute of Scrap Recycling Industries (ISRI) in April in Los Angeles, discussed.

For scrap recyclers and traders in the stainless steel sector, fabrication shops on the supply side and melt shops on the consuming side retain their prominent roles. The growth of the battery sector could play a role in pricing, however.

A useful metal

Stainless steel demand and consumption have been beneficiaries of the steady global economic growth of the current decade. Sectors including energy, construction and aerospace all have soaked up tons of the nickel-chrome-iron alloy.

Figures gathered by the Brussels-based International Stainless Steel Forum (ISSF) show stainless steel melt shop production increased from 19.2 million metric tons in 2001 to 31 million metric tons in 2010 and to 45 million metric tons in 2016.

Production of the metal has grown or been relatively stable every year in the 21st century, except for the global recession years of 2008 and 2009.

Austria-based stainless steel industry analyst Markus Moll of Steel & Metals Market Research GmbH, who gave a presentation at ISRI2019, reported that 52 million metric tons of stainless steel were produced globally in 2018. The 54 million metric tons forecast for 2019 represent a 2.7 percent growth forecast, which Moll characterized as “an underperforming year.”

Fellow ISRI2019 speaker Barry Jackson, a nickel market analyst with London-based mining and metals firm Anglo American, said 70 percent of nickel mined or recycled each year goes into stainless steel production.

In terms of its competition with other materials, stainless steel has benefited from the relatively low price of nickel this decade. A generous supply of nickel has been available to China’s growing stainless steel producers in the form of nickel ore mined in Indonesia, the Philippines and other nations near China.

Moll said China-based Tsingshan Group became the largest stainless producer in the world this decade, adding that the entire industry’s “epicenter has been moved to Asia.”

Despite the abundance of new production in Asia, ISRI2019 speaker Mitch Greenberg of Houston-based Allied Alloys said a generous supply of nickel ore in Asia and stainless scrap in Europe and North America has helped keep stainless steel affordable for its users. “No one has mentioned the replacement of stainless steel because of pricing” in the last several years, Greenberg said.

The price of nickel and stainless steel drifted higher in the first quarter of 2019, with the average price for nickel on the London Metal Exchange (LME) rising from about $11,450 per metric ton in January to an average monthly price of $13,050 in March.

The supply-demand balance that has kept pricing in check this decade could be under threat, however, depending on how thorough the EV and hybrid vehicle revolution turns out to be.

Driving into a new future

Around the world, significant investments are being made in EV and hybrid vehicle production. Automotive analysts, to some extent, are scrambling to determine just how fast and how significantly the EV and hybrid vehicle market share will grow.

For auto dismantlers and shredding plant operators, the growth of the EV sector at the expense of internal combustion engine (ICE) vehicles has a direct impact on the future.

For stainless steel recyclers, the impact might be more indirect, but one already can see the possible effect on nickel demand and pricing and, subsequently, stainless steel scrap pricing.

Jackson said the EV battery market is starting to chip away at stainless steel’s perch as the consumer of 70 percent of all nickel in a given year. Not only are more EV batteries being produced, Jackson said, but their average content is shifting toward the use of more nickel.

While earlier EV batteries contained equal amounts of nickel, cobalt and manganese, newer versions are tilting toward an “8:1:1” ratio, with nickel representing the eight. “Strong growth is expected for nickel consumption in batteries,” Jackson said, adding that the “trend so far is outperforming original expectations.”

Beyond the EV market, “Batteries for stationary storage is another growth area for nickel,” he said, referring to global developments in grid storage in the electrical utility sector.

Moving forward

For scrap metal processors, the emerging battery market may or may not represent an opportunity, with one ISRI2019 attendee saying automakers and battery producers have been making moves to create a closed loop or captive market for the nickel contained in those batteries.

That leaves recyclers to continue to focus on manufacturing plants and service centers on the supply side and stainless steel melt shops on the demand side.

In that traditional activity, tight margins have been the norm for recyclers in 2019, Greenberg said. He also cited an uneven demand situation.

As of early April, stainless steel recyclers in North America were asking, “When is demand going to go back up?” he said. “If you can sell product, that is a good day.”

Long-term forecasts raise the hope that some of the woes are temporary. Jackson said nickel inventories have declined in each of the past three years and “solid growth fundamentals for stainless” remain.

Moll and his research firm are predicting a fourth straight year of an overall nickel supply deficit in 2019. Recyclers, however, might benefit instead if nickel prices were to fall because “if the nickel price falls below $10,000 per metric ton, nickel pig iron (NPI) no longer makes sense to produce,” he said. NPI is produced in bulk in Asia and is consumed by stainless steel mills in China and Indonesia.

The sustainability movement could provide another source of good news. Jackson of Anglo American said stainless steel producers are seeking “scrap usage maximization” because the average “end consumer is more interested in recycled content.”

Any such influence on scrap demand will be welcomed by recyclers.

The author is senior editor with the Recycling Today Media Group and can be contacted at btaylor@gie.net.