Stainless steel pipe, fittings & flanges report: February 2018
Austenitic stainless steel PVF prices are driven to a substantial extent by the value of nickel. Recently, spot nickel prices have been volatile, generally riding a higher wave on the back of the weakening dollar while being periodically rocked by sharp corrections in equities markets. But regardless of the price swings, there’s been a significant bias to the upside for nickel prices. Besides a small decline in December, average monthly prices have increased every month since July. February’s average prices are 50.0 percent higher than last June’s and have not been this high since May, 2015.
While LME inventory levels are still historically high, they’ve recently fallen around 10.0 percent, and a third consecutive production deficit is expected for 2018. Investors’ excitement over global electric car sales has also boosted nickel’s fundamentals. It will be interesting to see whether the present price levels can be maintained, especially throughout and directly following the Chinese New Year holidays. Rising prices would indicate a bullish demand outlook, and the potential for prices to increase to even higher levels throughout 2018.
But with nickel, there’s always the other side of the coin. A literal paradigm shift has been occurring over the last decade as the nickel pig iron industry (NPI) has developed and innovated at warp speed. China was positioned to be the center of the NPI and, by extension, the stainless steel universe, but Indonesia has cleverly leveraged its possession of the highest grade and most plentiful nickel ore in an attempt to at least share future global stainless dominance. Indonesia banned nickel ore exports four years ago; the purpose of which was to create a value-added processing industry using, to a substantial degree, other people’s money, technology and ingenuity. Indonesia was the world’s largest producer of nickel prior to 2014; it should resume that position in 2018 with around 25.0 percent of global output and with a far more diversified and deliberate jobs generating approach. Individual Indonesian mines have begun integrating, and at least one has melting capabilities - feeding processed NPI and liquid chromium directly into on-site furnaces to produce slabs. The pace and scale by which other Indonesian miners follow this path should go a long way towards dictating future macro market dynamics for 300-series coil and their by-products. The pace by which more NPI is brought on stream in both China and Indonesia this year will affect nickel supplies and, in turn, prices.
Another important developing story, for which industrial distributors will want to keep a close watch, is the supply of finished PVF products. Anti-dumping actions taken by the U.S. Department of Commerce (DOC) over the last ten-plus years have affected the supply of import welded stainless steel pipe. A pending case concerning stainless steel ANSI flanges from India and China has already begun disrupting market prices and availability. The outcome of that case will likely have significant and lasting supply and cost/price implications across the U.S. market for import and domestic flanges. But costs and availability of stainless steel PVF products are being impacted by more than just trade cases. Stricter anti-pollution policies in China are adversely affecting production volumes of 150LB. stainless steel fittings and valves as many of these factories are located in target enforcement areas. Certain factories are forced to suspend activity from time to time, while others have permanently closed. Labor costs in many foundries and factories are also rising as workers become more difficult to attract and maintain.
The requisite consequences of the ecological issues in China and the heightened focus on trade actions against finished and semi-finished imports into the U.S. from international sources is already serving to increase lead times and costs of stainless steel PVF products. Accordingly, regardless of what actually happens with raw material prices, as long as demand remains strong in the stainless sector, and nickel supplies don’t grow, prices should rise in 2Q18 and possibly beyond.
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