After a few years of battling low market prices and reduced demand, stainless steel/nickel, titanium and cobalt could be recovering, or at least making a move out of the ICU. With markets hitting the floor and remaining there, dealers have been waiting for the improvement for more than two years. The wait may be over as stainless markets are beginning to move upwards, with titanium also strengthening and cobalt possibly following. 

BRUISED AND BATTERED

“The nickel market certainly took, in 1998, a severe beating,” says Sean Garber, president of ISA Recycling Inc., Louisville, Ky. “Both ferrous and nonferrous have been affected unfortunately to the negative and not the positive,” he says of the pricing plunges that occurred that year.

While nickel markets have been down, they may be on their way to recovery. “The second half of this year, from the stainless standpoint, nickel seems to be rebounding,” Garber says. “It is not reaching the level it was once at, but certainly there is some strength and demand and the margins are at least competitive and seem to be tightening.” 

The stagnant states of the nickel and stainless markets were not predicted by all forecasters, and perhaps were not expected to stay down for as long as they have. “I couldn’t have anticipated the type of downturn we had last year,” he says. “At the beginning of ’98 people were forecasting big numbers and that didn’t happen.”

Overseas markets have had an influence on U.S. nickel markets. “The key to what happened in ’98 was that the rest of the world fell on hard times and the U.S. economy was still strong, so things that could have been exported stayed and hurt our entire commodity market,” Garber says. “There is some export activity again now, helping to keep demand at a high level.”

THROWING THE PUNCHES

The stainless and nickel markets are beginning to show some signs of recovery both in demand and pricing. Stainless seems to be faring quite well, both domestically and internationally. “Demand is very good,” says Barry Hunter, senior vice president of Keywell LLC, Elizabeth, N.J. “Demand for stainless steel is very high and [mills are] at high production levels.”

Jerry Turchin, president of California Metals, El Cajon, Calif., says business is doing very well, and that people have been calling for material. “Scrap dealers are perpetual optimists. We always think things are going to get better. It could go up substantially. It seems like if there is any buoyancy in the market, they can go up substantially.”

One factor that has made stainless steel “more in vogue” as Hunter says, is the competitive prices for stainless steel scrap compared to scrap substitutes. Nickel production and pricing also affects stainless scrap pricing. “We have to relate our business to the production levels and price of nickel,” he says. “It is a delicate balance to production levels and pricing.”

Hunter, also president of the Bureau of International Recycling, Brussels, says he has seen increases in production and, as with other metals, the markets for stainless steel are global. “If production levels are high in the U.S., you can imagine they’ll be high in the Asian markets.” On the supply end of the chain, he says, “I think that with the production levels that exist currently around the world, it would be very difficult to say there is sufficient scrap available to really be in a position to maximize scrap utilization.”

THE KNOCK OUT

As with many other commodities, if the supply does not meet demand, prices will reflect that. “Some mills say that if the price is not attractive then they cut down what they use,” Hunter says of stainless scrap demand. “If that available scrap is not sold, then that inventory builds. It is very much an elastic market—the higher the price the more is available.”

But much of stainless pricing depends on the nickel market. “The nickel market is in front of everybody,” Hunter says. “The LME is going to be the pace setter as far as pricing is concerned.”

And while nickel prices have been very low, says Peter Kuck, a consultant with the U.S. Geological Service, Reston, Va., supply and demand seem to be in equilibrium. “There seems to be plenty of supply, it’s just a matter of whether supply will outpace demand.” Problems and/or low consumption overseas could make the road to recovery slightly longer. “When Russian consumption turns around at some point—and it will—then you may see a big tightness in the market. These new projects will produce enough nickel to meet demand. But that could be in five years,” he says.

New uses for nickel may also help markets to improve. Specialty nickel powders used in cell phone batteries and the new Toyota hybrid electric vehicle are two new uses that could help bring demand up.

Jim Wilkoff, a stainless scrap buyer at Wilkoff & Sons, Cleveland, says he thinks business is on the way up. “Pricing is obviously being driven by the rather tremendous improvement of nickel on the LME. As relating to that, the price the mills [can charge for product] also continues to improve.”

Overseas, European production of stainless steel has grown throughout the 90s, with about 7.3 million tons produced in 1998, which required about 500,000 tons of nickel, industry consultant E.J. Hayes told attendees at the 1999 ISRI Nickel/Stainless/Specialty Metals Roundtable in Pittsburgh. Russia has been behind much of the turmoil in the nickel/stainless scrap market. In 1990, the country put just 2,000 tons of nickel-bearing scrap on the market, compared to a high of 346,000 tons in 1997. Export numbers from Russia are down from their peak, with Russia placing about 300,000 tons into the market in 1998.

Some of the slowdown in stainless scrap exports may be because of the reduced number of obsolete factories and buildings left to dismantle and scrap in the former Soviet Union. “The rate at which plants are being dismantled is greater than the rate that new stainless products are entering the Russian market,” Hayes said.

DOWN FOR THE COUNT?

Titanium could be improving; some might say that the metal had nowhere to go but up. The basement prices seen the past few years could be a thing of the past, and a steady climb to better pricing is possible due to increased business in the aerospace industry. But, while some businesses are optimistic that improvement is in the future, others are not quite sure what turn the markets may take.

A key industry for the titanium market remains the aerospace industry. “One of our key accounts (in the aerospace industry) has been doing more soliciting nationally—aerospace and aircraft seems to be picking up orders,” Turchin says.

Although some traders or dealers are optimistic that the aerospace industry will bring titanium markets up, others are not holding their breath on the issue. They note that for many years the expectation has been that airlines would begin replacing aging fleets, but anticipated large-scale orders have not been placed.

As with titanium scrap, one area that consumes a lot of ferro-titanium scrap is the aerospace industry, says one domestic scrap processor. That same domestic scrap processor says he has seen primary titanium consumption stay rather stagnant right now. “Ferro-titanium has noticed a [price] increase as of late due to the need for the ferro-titanium grade and because of less availability of scrap, both overseas and domestically,” he says.

He is wary of forecasting very far in advance, but predicts that things could stay about the same as they are currently. “Primary titanium producers are not producing as much as they have the previous generation and [total production] has not been where it has been in the past. There will be less quantities to consume and the price would go up.”

THE SMELL OF VICTORY

As in some of the other specialty metals markets, cobalt pricing has been low because of oversupply. “It is really purely economics that there is enough material and the price is slowly coming down,” says one East Coast cobalt trader.

Although cobalt prices dropped significantly in 1998, they appear to be on the road to recovery, though that is not yet a certainty. 

Some of the driving forces behind the current sluggishness, especially in the U.S., have been the superalloy industry, the aircraft business and land turbines, says one East Coat cobalt trader. “[Those industries] have been pretty slow to foresee the pickup in the second quarter of next year,” he says. 

With new production coming out of Australia, Kim Shedd, cobalt commodity specialist for the USGS, says there could be overproduction of cobalt if all companies proceed with production plans. “I think in the long term there is an expectation for the rate of supply to increase and it will grow faster than demand increases,” she says. 

An East Coast trader sees prices remaining down until after the holidays, though that could change with several plants that came back on line in late January. “It will keep things just as quiet and then people will start buying again in January,” he says.

And once demand begins to increase, prices could also rise. “In the meantime you have several sources of cobalt coming online in Australia, and the supply side will be increasing together with demand. I don’t see any big movements”

As with stainless, pricing is often linked to the pricing of other commodities. “The consumption of cobalt and superalloys is basically linked to general industry,” the same East Coast trader says. “A big portion is linked to cutting tools, auto making and building construction. When basic manufacturing is good then there is a healthy demand for cobalt.”

The U.S. is one of the major consumers of cobalt, tallying 34% of the total consumption in 1998, according to a ISRI Nickel/Stainless/Specialty  Metals Roundtable presentation by Mark Caffrey, president of Sogem USA Inc., Raleigh, N.C. Asia (not including China) follows with a combined 31%, Western Europe with 20%, China with 6% and the former Soviet Union follows with 4%. About a quarter of this cobalt goes to superalloys, mostly used in aerospace and defense applications. The rest is divided among batteries, the ceramics industry, as a drying agent in the paint industry, magnets, and the remainder is used in other alloys, Caffrey said in his presentation.

Cobalt is more easily recovered for recycling in some applications rather than others. It is most easily removed for recycling from batteries and alloys, but is often considered unrecoverable or difficult to remove from ceramics and paint applications.  RT

The author is the Assistant Editor of Recycling Today.