Shining nickel

It’s been a challenging year for base metals. Pricing for ferrous scrap has been trending downward for much of 2019, while the same can be said of copper and aluminum scrap. Nickel, on the other hand, has made gains in pricing, said Michael Friedman, president of Sustainable Scrap Management Corp., Louisville, Kentucky. Friedman moderated the Nickel Stainless Roundtable at the Institute of Scrap Recycling Industries (ISRI) 2019 Commodities Roundtable Forum Sept. 11-13 in Chicago.

In January, nickel sold for an average price of $11,450 per metric ton on the London Metal Exchange (LME). By August, the price increased to $15,670.

Fred Penha, a base metals trader for INTL FCStone, New York, said nickel pricing is up 70 percent year to date through mid-September, while gold is up 18 percent. However, he added, “The rest of the base metals complex is essentially down 5 to 10 percent.”

“We believe that part of the driver for nickel prices are folks speculating in China. Nickel is actually one of the preferred financing vehicles for speculating.” – Fred Penha, base metals trader, INTL FCStone

The growth in nickel pricing and demand, however, has not been driven by real consumption, he said.

Penha mentioned that the Indonesian ban on the export of nickel ore, which was moved forward from 2022 to January 2020, has affected the market.

Additionally, the introduction of a nickel futures contract on the Shanghai Futures Exchange (SHFE) in 2015 “has thrown a new element into nickel pricing,” Penha said. “We believe that part of the driver for nickel prices are folks speculating in China. Nickel is actually one of the preferred financing vehicles for speculating.”

Barry Hunter, principal of Hunter Alloys LLC, Boonton, New Jersey, said he also looks at stocks on the LME—where they are and what they are—in relation to the speculation about the growth of electric vehicles because their batteries will require a great deal of nickel. He added that nickel sulfide or briquettes will be used to produce these batteries. “You cannot use nickel plate in making that particular product.”

Hunter continued, “If you look at the stocks on the LME, 90 percent of that stock is in the form of briquettes. And where is it? It’s in Asia.”

While he said nickel plate stocks on the LME in Asia are decreasing, briquette stocks are not. He explained that he believed this indicates that Chinese traders are preparing for future growth in electric vehicle production in that country.

Penha added that because the SHFE warehouses are located only in mainland China and the LME warehouses are all over the world with the exception of mainland China, they are good proxies for demand in China and globally, respectively.

China produced 26.7 million metric tons of stainless steel in 2018, or 53 percent of the world’s 50.7 million metric tons of production, ISRI Chief Economist and Director of Commodities Joe Pickard said. In 2001, China produced a mere 730,000 metric tons of stainless.

China has relied less on U.S. scrap in its stainless steel production this year. The country’s imports of stainless scrap from the U.S. declined from 26,528 metric tons in 2018 to 5,453 metric tons through June of 2019. This is a decrease of nearly 58 percent, according to Pickard’s presentation.

He said Taiwan is the largest export market for U.S. stainless scrap, with demand having increased by more than 67 percent through June compared with the same period in 2018. India is the next largest market, with demand having grown by nearly 88 percent through June compared with the same period in 2018.