Improving stainless steel output, electric vehicle sales and commodity investor sentiment are contributing to firmer prices across the nickel-stainless supply chain. After having bounced around US$ 16,000 per tonne late in the first quarter, LME nickel prices were about US$ 18,000 in early May as stocks in the exchange’s warehouses were being drawn down.
For stainless steel scrap processors and exporters, transportation bottlenecks are still at a critical level given the on-going challenges of securing shipping containers and vessel space. According to Census Bureau data, US stainless scrap exports in the first quarter of 2021 tumbled 51% year on year to just 54,000 tonnes on reduced trade with India, Canada, Pakistan, Taiwan and Mexico.
But the current recovery in prices and output bode well for scrap demand going forward. According to the latest figures from the International Stainless Steel Forum, global stainless meltshop production declined 2.5% in 2020 to just under 50.9 million tonnes as output in the USA plunged 17.3% and the European total declined 7.1%. As economies began to loosen COVID restrictions in the second half of last year, global stainless steel production advanced from 11.6 million tonnes in the second quarter of 2020 to 13.5 million tonnes in the third quarter and 14.1 million tonnes in the final three months.
In addition to the growth in global stainless steel production, rising electric vehicle (EV) and battery sales have become an increasingly important source of demand. Signs of the improved EV sales environment are beginning to show up in corporate results too: according to the latest quarterly report from Tesla, revenues in the first quarter of 2021 jumped 74% from a year earlier to US$ 10.39 billion as it delivered 184,800 Model 3 and Model Y cars, beating expectations and setting a company record.
Looking forward, most analysts are projecting elevated nickel and stainless steel prices in the near term as global manufacturing and economic growth are expected to ramp up. The International Monetary Fund is now forecasting the global economy will recover from a 3.3% contraction in 2020 to 6% growth in 2021, including a 6.4% increase in the USA. As for nickel prices, Reuters reports that its poll of commodity analysts returned a median forecast of US$ 16,973 per tonne for 2021, although their forecasts ranged from a high of US$ 18,640 to a low of US$ 15,750 amid continued nickel market volatility.
