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Rising Cost of Nickel = Higher Stainless Steel Fastener Prices
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2014-07-25
Nickel prices for stainless steel are rising and reached a two-year high in early May 2014.
Bruce Wheeler of Star Stainless pointed out, “Since January nickel has risen 35% making it the best performing metal of the London Metal Exchange.” Differing analysts predict higher and lower nickel prices in the coming months, but already there is “one thing for sure, the world of stainless fasteners will begin to see higher prices and longer lead times,” Wheeler told. “The recent surge of nickel prices has prompted heavy purchasing from the serious stainless buyers causing producers to become very busy and lead times to stretch out.”
Wheeler cited the January export ban of unprocessed nickel laterite ore from Indonesia as starting the nickel price increase. “Combine this with trader speculation of the current situation taking place in Russia and prices have jumped significantly in the last 90 days,” Wheeler told. Russia is home of Norilsk Nickel, which is the world’s largest miner of nickel and palladium, Wheeler noted. Another factor is the Ukraine crisis has buyers worried about supply from Russia.
FT.com added that a mine shutdown in New Caledonia due to a spill and positive trade data from China also are driving up the nickel price. Nickel buyers in China are “scrambling to secure material for their processing plants” leading speculators to rush in, reporter Xan Rice wrote.
Vale SA halted production at its Goro plant in New Caledonia. The mine was anticipated to produce 40,000 tons of the world’s two million tons of nickel during 2014. Glencore Xstrata’s Koniambo mine in New Caledonia was producing at a rate below its 26,000-ton forecast.
Nickel for three-month delivery on the London Metal Exchange rose as high as $19,786 a ton May 8, 2014 – topping a peak in March 2012. “The market wants to be long so any sort of bad news acts as a catalyst,” analyst Colin Hamilton of Macquarie told. “Nickel is the one commodity with tangible raw material constraints that people can see at this time.”
Indonesia supplies up to a quarter of global nickel production and the export ban comes from high-grade Indonesian ore. The export ban is unlikely to be lifted, analysts told. Most of the Indonesian nickel goes to China to be processed into nickel pig iron. China’s inventories “are expected to run out later this year. There is no alternative supply to the Indonesian ore,” according to FT.com.
The nickel market frequently has significant price swings. For example, there was a four-fold price increase from late 2005 to May 2007. By the end of 2008 it was back down. “We don’t yet know the seriousness of the Goro incident or how long the suspension will last,” said analyst Stephen Briggs of BNP Paribas. “But in this market it does not take much to push nickel up.”
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John Wolz, Editor of FIN
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