During my time as Chairman of the BIR Stainless Steel & Special Alloys Committee, I have typically incorporated a summary of LME nickel highs and lows in my reviews of the previous year. But never before have I had to report a complete, albeit temporary, absence of LME benchmark prices.

Last year began with LME nickel at just over US$ 20,000 per tonne, dipping below this level only in July before ending 2022 at around the US$ 30,000 mark. But these figures fail to reflect the unprecedented drama in March last year when, shortly after the outbreak of the Ukraine conflict, the LME was forced to suspend nickel trading after prices suddenly sky-rocketed to more than US$ 100,000 per tonne, with the finger of blame being pointed at short-covering by a leading producer.

For eight days, we found ourselves in the unfamiliar and destabilizing position of having no reference prices available from this metals industry institution of almost 150 years’ standing. And despite the relatively quick resumption of trading on the Exchange, the shock waves are still being felt today.

During the undoubtedly timely meeting of our Committee in Barcelona last May, we were able to gauge the immediate impact of this trading hiatus. Robin Martin, the LME’s head of market development, acknowledged that the Exchange’s nickel volumes were 15-20% lower than in the corresponding period of 2021 and that it had work to do to rebuild confidence and trust.

As we learned at the meeting, however, some companies had already incurred significant and irretrievable financial losses, such as through paying out huge amounts in margin calls. There were also suggestions of a significant trend towards direct negotiations rather than using an LME nickel price that, many believe, can no longer be relied upon to reflect the physical market.

In essence, 2022 could prove to be the watershed year in which the LME’s status as a global nickel price reference point began to unravel. Already, LME-deliverable nickel is occupying a significantly smaller share of the world supply and consumption universe.

Even before this controversy, we in Europe were experiencing lower order intakes as a consequence of pandemic-related effects on all parts of the stainless supply chain and therefore on demand. Rising costs relating to the production of stainless steel – such as for energy, electrodes, ferro-silicon and scrap – were pushing finished goods prices ever higher and duly impairing demand.

The start of the Ukraine conflict tipped the balance even more sharply towards the negative: soaring energy costs and interest rates fuelled talk of recession and convinced the public to be more cautious in their spending. Europe’s stainless steel producers have seen a worrying downturn in demand for their products, not least because of a record level of imports. With sales prices falling more rapidly than ever before and plenty of finished goods in stock, producers have been working to some of the lowest capacity utilization rates ever known.

Against this discouraging backdrop, demand and prices for stainless scrap have remained very low. Soft market conditions have dominated in the USA and Asia too, not helped by India’s 15% export duty on finished stainless products which has slowed demand for scrap imports. In China, by contrast, stainless scrap demand was healthy in the second half of last year owing to its price advantage over nickel pig iron.

By the time we met in Dubai last October, we were craving some good news. Guest speaker Robert Messmer of Steel & Metals Market Research did his best to oblige by reflecting the broad span of applications for which stainless steel was the material of choice. Rather more disconcertingly, however, he pointed out that some of the traditional uses of stainless steel within the automotive industry – such as in exhaust units for internal combustion engines – were diminishing as the industry stepped up its transition to electric vehicles.

Confidence levels in the LME and the effects of
the Ukraine crisis are among the key issues to have carried over from 2022 into 2023. Indeed, nickel price forecasts for the current year have been made even more unstable as a result of risks surrounding Russian supply.

As we all know, lack of confidence and uncertainty are poisonous for business prospects. So in anticipation of another difficult year, we can do no better than fall back on our most trusted allies: resilience and an eye for opportunity.