The monthly alloy surcharge (AS) for stainless steel AISI 304 increased by 3.2% from 1,361 Euro per tonne in September to 1,404 in October *. The 316 alloy surcharge increased by 2.2%, to 2,120 euro per ton for October *. This is the highest value since July 2012.
The alloy surcharge is a major component of stainless steel pricing. The alloy surcharge increase of October was preceded by a minor increase of the AS in September for both 304 as 316. However, the AS increases were much higher in May and June: 304 rose by 9.0% and 14.8%, the 316 AS even by 12.2% and 16.7%.
Nickel continues to fluctuate
The price of nickel is one of the main components which determines the alloy surcharge. Figures for nickel have been constantly fluctuating throughout the year. In early 2014, the price of nickel was still trading at 10,080 Euro per tonne, whereas in May the price briefly touched 15,400 per tonne.
Since the second week of September, the nickel price shows a downward trend, from 15,200 Euro on September 8th to 13,000 Euro on September 30th, more or less equal to the position of mid-June, but still significantly higher than at the start of 2014. Several analysts expect a sharp rise in the price of nickel in 2015, with figures above 16,000 Euro ($20,000)**
Different factors influence the price of nickel. One of them is the worldwide stock level of nickel, which has been rising for some time now. Last month showed an increase in the global nickel stock amounting to 329,000 tons (September 1st). Over the month of September this increased to 353,000 tons (September 30th, source: LME).
Initially a decrease in the nickel stock level was expected after the Indonesian export ban was initiated in January. But according to the London Metal Exchange ( LME) inventories have not dropped yet. This could be due to the increased exports of nickel from the Philippines. However, it is questionable, to which extent this stock surge is correct. Analysts from American bank Goldman Sachs claim that it is for a large part just relocation of stocks to warehouses monitored by LME. In that case the stock Increase would be much smaller.
So we see a slight increase in the AS for October, huge fluctuations of the nickel prices throughout 2014, a claimed increase in nickel inventories. In addition to these developments, we see a strong increasing demand for stainless steel over the last few months and we expect this to be a trend of the whole market.
EU investigates anti-dumping legislation
The European Commission is investigating whether there should be any import duty on stainless steel from China and Taiwan, if it is concluded that there is ‘dumping’ of the material. It is not yet certain whether this legislation will be passed. If that should happen, the Chinese/ Taiwanese material will become considerably more expensive. Which may in turn affect the prices we pay in Europe for stainless steel.
Expectations for the coming months
Because of all the uncertainty at play it is difficult to give a clear forecast the alloy surcharge and stainless steel price developments for the final months of 2014. However, for 2015, we expect an increase of the stainless steel prices in line with the forecasted increase of nickel prices.
About the alloy surcharge and the price of nickel
The alloy surcharge (AS) is one of the main components in the price of stainless steel. In addition to the alloy surcharge, factories calculate a basis price. An increase of the AS usually means an increase of the stainless steel prices.
Nickel is one of the main elements in the 304 and 316 alloy and the AS is for a large part calculated based on the price of nickel. Because nickel is internationally traded in dollars, the euro to dollar exchange rate is influencing the alloy surcharge for the European market.
* The mentioned alloy surcharges are from Aperam. The alloy surcharges from Outokumpu show a comparable trend.
** As claimed by Australian research analyst Carey Smith from Alto Capital and analysts from American bank Goldman Sachs.
Caution: The content of this article reflects the view of HEGO. Although HEGO has taken all reasonable care in writing this article, it is possible that the information in it is incomplete or incorrect. HEGO does not accept liability for this.