Stainless steel downtrend continues, INSG forecasts nickel supply surplus in 2022

The downtrend in stainless steel scrap prices continue. The 304 grade scrap fell by INR 28,000/t m-o-m due to falling LME prices and low demand for scrap from manufacturers. A similar downtrend was also observed in other raw material prices like ferro chrome and stainless steel finished products. The effective price of 304 grade scrap is INR 165,000/t ($2,129/t) exy Delhi.

LME nickel three-month is currently trading at around $26,200/t, a drop of nearly $7,600/t m-o-m.

The global output of stainless steel rose by 10.6% to 56.3 mnt last year, according to the International Stainless Steel Forum. The major use of nickel is in stainless steel and in EV batteries, although usage share in the former is comparatively higher.

China, the world's largest stainless producing nation, experienced a sharp slowdown over the second half of the year, resulting in y-o-y growth of only 1.6% due to strict Covid lockdowns. But the production level was offset by Europe and Asian countries.

The International Nickel Study Group (INSG) has forecasted a supply surplus of 67,000 t in 2022 due to the increase in China's and Indonesia's production and an expected positive but slower growth in the stainless steel sector, increased usage of nickel in batteries for electric vehicles (EV).

Nickel

The global primary nickel production was at 2.490 mnt in 2020 and 2.608 mnt in 2021, and is forecasted to reach 3.082 mnt in 2022. It is forecasting a 18.2% jump in global production driven by Indonesia's new capacity building. Global primary nickel consumption was at 2.390 mnt in 2020 and 2.776 mnt in 2021.

Global nickel usage surged by an extraordinary 16.2% last year on the back of booming demand from both the dominant stainless steel and fast-growing battery end-use sectors.

The INSG forecasts consumption increase of 8.6% to 3.015 mnt in 2022, exceeding the 3.0 mnt mark for the first time ever, according to the latest statistical snapshot on the market.

Outlook
The current slower demand for stainless steel across global markets has raised concern over nickel demand. This can be offset by rapidly increasing offtake from the electric vehicle (EV) battery sector.

Not all batteries use nickel, particularly in China, but the scale of the EV roll-out is such that demand for the metal is still increasing at a supercharged pace.

However it is predicted that stainless steel prices may remain stable or may see some correction if the EV battery sector under-performs.