Stainless
Stays Strong
After
decades of ups and downs, the stainless market is expected to grow for the
next 10 years, with a matching growth in nickel production.
Only
in the last quarter of 1983 did demand--and production--of stainless pick
up. Global consumption of stainless rose steadily between 1984 and 1986,
fueled mainly by consumer spending. Then, from 1986 to 1987, the level of
investment by the petroleum, chemical, transport, and process industries took off, not only in North America, but also
in Western Europe, Japan, Taiwan, and South Korea. Meanwhile, industrial
production of stainless soared.
This
wealth of activity had its effect on prices. At the end of 1987, the
reserve capacity of both nickel and chromium producers had been depleted,
and two further surges in stainless demand and production--once in early
1988 and then again in early 1989--propelled London Metal Exchange
nickel quotations and free-market chromium prices to between 2.5 and 3.5
times normal levels.
The
boom in stainless steel collapsed in the second half of 1989, and prices
of austenitic grades of stainless (the "18-8" grades, which
contain 6 to 20 percent nickel and between 16 and 26 percent chromium)
dropped in the United States and Western Europe by about 50 percent from
their peak. In Japan, where prices never peaked as high, prices fell only
12.5 percent.
With
fabrication-processing losses being reduced to minimum levels, and the
recovery yield of stainless semis continuing to improve through constant
attention to production control and near-net-shape casting and rolling,
the overall generation of stainless scrap likely will continue to slowly
decline. However, this trend is not about to have a great impact on the
world stainless scrap market over the next decade. It seems safe to
estimate that the same average of 45 to 47 percent stainless steel scrap
share will be available to the steel industry against its increasing
production in the 1990s.
Yet,
as we know from the last 10 to 20 years' experience, the greatest impact
on scrap's availability and prices likely will come from big changes in
steel mills' production plans. Demand fluctuations for scrap in the United
States, for example, will underline the importance of export business to
scrap processors.
Who
Uses What?
Stainless
consumption figures compiled by Inco Ltd. based on steel company
deliveries and on stainless trade flows across borders indicate that both
consumption quantities and growth vary throughout the world.
Through
the 16 years covered in the table the U.S. average annual stainless growth
rate has been approximately 3 percent; Western Europe has achieved
approximately a 4-percent annual average increase; Japan, about 5 percent
per year; and the rest of the world, approximately 6.5 percent annually.
The global average compound has approximated 4.5 percent per year.
What
does the future hold? Assuming no dramatic change in price relationships
between stainless steel and its principal competitive materials--plastics,
aluminum, and coated steel--and no major growth in exports of stainless or
stainless products to the Soviet Union, Eastern Europe, or China, Inco
Ltd. predicts that stainless's global average growth rate will maintain
its 4 to 5 percent annual growth over the next 10 years.
Thanks
to its thousands of applications in industrial and consumer equipment,
stainless steel has applied and likely will continue to apply its growth
to a variety of end-use sectors. Over the past 10 years, consumption has
seen high growth in the automotive, pharmaceutical, food and drink
processing, commercial kitchen equipment, and construction and building
industries. Stainless consumption in bulk chemical plants, pulp and paper
machinery, and oil- and gas-winning equipment grew at a moderate rate
during the same 10-year period, while smaller growth has been evident in
the electrical/electronic equipment, domestic tableware, ship
construction, rail transport, and power generation industries.
Although
it appears that stainless is at the end of its rapid-growth phase in the
United States, developing countries in which the average annual per capita
income is approximately $500 to $1,000 should increase their stainless steel investment levels,
infrastructure, transport, and industrial goods. There are huge potential
markets in Asia, South America, Africa, and Eastern Europe for household
flatware, hollowware, sinks, and household appliances. However, because
use of stainless in domestic appliance production m the United States,
Europe, and Japan has not been growing, increasing sales of dishwashers,
washing machines, food mixers, and other household appliances in
developing countries likely will not increase stainless steel consumption
in that sector globally.
On
a surprising side note, Japan has been the largest consumer of stainless
steel for building and construction, with that market sector accounting
for 12 to 14 percent of national stainless use. By contrast, that figure
is closer to 5 or 6 percent in the United States and Western Europe.
Austenitics
and Ferritics
The
stainless steel market is comprised primarily of two types: austenitics
and ferritics, which contain 18 to 30 percent chromium. The former
traditionally has held the largest share of the stainless market, with
varying ratios in different areas of the world. Austenitics account for 69 percent of Japan's stainless use, 71
to 72 percent of U.S. consumption, 73 to 74 percent of the stainless steel
used m Western Europe, and 88 percent in the rest of the world.
Improvements
in the quality, processing time, and yield of the ferritics, however, have
helped increase the applications for these grades in the automotive,
building and construction, container transport, and commercial kitchen
equipment sectors. That, coupled with the fact that more and more steel mills are able to supply ferritic
stainless, means we probably can expect a small but definite shift toward
ferritic stainless use in the next decade.
Nickel
Specifics
More
than half of the world's primary nickel, including ferro-nickel, is consumed by stainless steel mills. That tendency toward stainless mill
use is likely to continue: Over the next 10 years, nickel consumption by
stainless steel is estimated to increase approximately 4 to 5 percent
annually, while consumption in all other
applications should only grow approximately 1 to 2 percent per
year.
Growth
of world nickel production should be able to reach the overall 3.3 percent
average annual increment needed to meet the projected consumption demand.
World reserves are considerable, and expansions already announced for
start-up in the next three years indicate an additional annual output of 35,000 to
40,000 tons.
Future
Swings
Through
the 1990s, assuming positive growth rates in gross domestic product and
industrial production throughout the world, growth of stainless
consumption should easily outpace both of those year-on-year figures. This
strong growth likely will be matched by expansions in output by chromium
and nickel mines.
But,
just as investment, taxation, private spending rates, and inflation
fluctuate, so might stainless steel demand. In addition, because stainless
steel production fluctuates, so does the price of nickel. The call today
is for price stability, with no more repeats of the nickel-price
roller-coaster of 1988 and 1989, but if stainless does grow as predicted,
some instability should be expected. Some actions to avoid dislocations in
stainless orders, in inventory policy, in production plans, and in raw
material purchases can be taken, however. If stainless steel is to
continue to compete against other materials--which also will fluctuate in
output and price--manufacturers and users of stainless steel (including
scrap consumers) will have to engage more deeply than m the past in the
pricing mechanisms available, and closely match these to their forward
sales commitments. By doing so, all would be working with and for growth
in stainless use, without jumping on the boom-or-bust wagon that can only
do lasting damage to confidence in stainless.
[SIDEBAR]
Nickel
Consumption by Application
Stainless steel mills: 62%
Electroplating and
electroforming industries: 10%
Nickel-base and copper-base
alloy manufacturers: 12%
Others (including use in
coinage, catalysts, and batteries): 16%.
Source:
Inco Ltd.
[SIDEBAR]
Worldwide
Apparent Consumption of Stainless Steel
United States:
1973: 1.12 million mt
1986: 1.30
1987: 1.48
1988: 1.65
1989: 1.56
Europe:
1973: 1.5 million mt
1986: 2.43
1987: 2.48
1988: 2.86
1989: 2.7
Japan:
1973: 1.01 million mt
1986: 1.29
1987: 1.48
1988: 1.87
1989: 1.78
Remaining
Countries:
1973: 420,000 mt
1986: 1.2 million mt
1987: 1.49
1988: 1.72
1989: 1.66
Total:
1973: 4.05 million mt
1986: 6.22
1987: 6.93
1988: 8.1
1989: 7.7
Stainless
Stays Strong
After
decades of ups and downs, the stainless market is expected to grow for the
next 10 years, with a matching growth in nickel production.
Only
in the last quarter of 1983 did demand--and production--of stainless pick
up. Global consumption of stainless rose steadily between 1984 and 1986,
fueled mainly by consumer spending. Then, from 1986 to 1987, the level of
investment by the petroleum, chemical, transport, and process industries took off, not only in North America, but also
in Western Europe, Japan, Taiwan, and South Korea. Meanwhile, industrial
production of stainless soared.
This
wealth of activity had its effect on prices. At the end of 1987, the
reserve capacity of both nickel and chromium producers had been depleted,
and two further surges in stainless demand and production--once in early
1988 and then again in early 1989--propelled London Metal Exchange
nickel quotations and free-market chromium prices to between 2.5 and 3.5
times normal levels.
The
boom in stainless steel collapsed in the second half of 1989, and prices
of austenitic grades of stainless (the "18-8" grades, which
contain 6 to 20 percent nickel and between 16 and 26 percent chromium)
dropped in the United States and Western Europe by about 50 percent from
their peak. In Japan, where prices never peaked as high, prices fell only
12.5 percent.
With
fabrication-processing losses being reduced to minimum levels, and the
recovery yield of stainless semis continuing to improve through constant
attention to production control and near-net-shape casting and rolling,
the overall generation of stainless scrap likely will continue to slowly
decline. However, this trend is not about to have a great impact on the
world stainless scrap market over the next decade. It seems safe to
estimate that the same average of 45 to 47 percent stainless steel scrap
share will be available to the steel industry against its increasing
production in the 1990s.
Yet,
as we know from the last 10 to 20 years' experience, the greatest impact
on scrap's availability and prices likely will come from big changes in
steel mills' production plans. Demand fluctuations for scrap in the United
States, for example, will underline the importance of export business to
scrap processors.
Who
Uses What?
Stainless
consumption figures compiled by Inco Ltd. based on steel company
deliveries and on stainless trade flows across borders indicate that both
consumption quantities and growth vary throughout the world.
Through
the 16 years covered in the table the U.S. average annual stainless growth
rate has been approximately 3 percent; Western Europe has achieved
approximately a 4-percent annual average increase; Japan, about 5 percent
per year; and the rest of the world, approximately 6.5 percent annually.
The global average compound has approximated 4.5 percent per year.
What
does the future hold? Assuming no dramatic change in price relationships
between stainless steel and its principal competitive materials--plastics,
aluminum, and coated steel--and no major growth in exports of stainless or
stainless products to the Soviet Union, Eastern Europe, or China, Inco
Ltd. predicts that stainless's global average growth rate will maintain
its 4 to 5 percent annual growth over the next 10 years.
Thanks
to its thousands of applications in industrial and consumer equipment,
stainless steel has applied and likely will continue to apply its growth
to a variety of end-use sectors. Over the past 10 years, consumption has
seen high growth in the automotive, pharmaceutical, food and drink
processing, commercial kitchen equipment, and construction and building
industries. Stainless consumption in bulk chemical plants, pulp and paper
machinery, and oil- and gas-winning equipment grew at a moderate rate
during the same 10-year period, while smaller growth has been evident in
the electrical/electronic equipment, domestic tableware, ship
construction, rail transport, and power generation industries.
Although
it appears that stainless is at the end of its rapid-growth phase in the
United States, developing countries in which the average annual per capita
income is approximately $500 to $1,000 should increase their stainless steel investment levels,
infrastructure, transport, and industrial goods. There are huge potential
markets in Asia, South America, Africa, and Eastern Europe for household
flatware, hollowware, sinks, and household appliances. However, because
use of stainless in domestic appliance production m the United States,
Europe, and Japan has not been growing, increasing sales of dishwashers,
washing machines, food mixers, and other household appliances in
developing countries likely will not increase stainless steel consumption
in that sector globally.
On
a surprising side note, Japan has been the largest consumer of stainless
steel for building and construction, with that market sector accounting
for 12 to 14 percent of national stainless use. By contrast, that figure
is closer to 5 or 6 percent in the United States and Western Europe.
Austenitics
and Ferritics
The
stainless steel market is comprised primarily of two types: austenitics
and ferritics, which contain 18 to 30 percent chromium. The former
traditionally has held the largest share of the stainless market, with
varying ratios in different areas of the world. Austenitics account for 69 percent of Japan's stainless use, 71
to 72 percent of U.S. consumption, 73 to 74 percent of the stainless steel
used m Western Europe, and 88 percent in the rest of the world.
Improvements
in the quality, processing time, and yield of the ferritics, however, have
helped increase the applications for these grades in the automotive,
building and construction, container transport, and commercial kitchen
equipment sectors. That, coupled with the fact that more and more steel mills are able to supply ferritic
stainless, means we probably can expect a small but definite shift toward
ferritic stainless use in the next decade.
Nickel
Specifics
More
than half of the world's primary nickel, including ferro-nickel, is consumed by stainless steel mills. That tendency toward stainless mill
use is likely to continue: Over the next 10 years, nickel consumption by
stainless steel is estimated to increase approximately 4 to 5 percent
annually, while consumption in all other
applications should only grow approximately 1 to 2 percent per
year.
Growth
of world nickel production should be able to reach the overall 3.3 percent
average annual increment needed to meet the projected consumption demand.
World reserves are considerable, and expansions already announced for
start-up in the next three years indicate an additional annual output of 35,000 to
40,000 tons.
Future
Swings
Through
the 1990s, assuming positive growth rates in gross domestic product and
industrial production throughout the world, growth of stainless
consumption should easily outpace both of those year-on-year figures. This
strong growth likely will be matched by expansions in output by chromium
and nickel mines.
But,
just as investment, taxation, private spending rates, and inflation
fluctuate, so might stainless steel demand. In addition, because stainless
steel production fluctuates, so does the price of nickel. The call today
is for price stability, with no more repeats of the nickel-price
roller-coaster of 1988 and 1989, but if stainless does grow as predicted,
some instability should be expected. Some actions to avoid dislocations in
stainless orders, in inventory policy, in production plans, and in raw
material purchases can be taken, however. If stainless steel is to
continue to compete against other materials--which also will fluctuate in
output and price--manufacturers and users of stainless steel (including
scrap consumers) will have to engage more deeply than m the past in the
pricing mechanisms available, and closely match these to their forward
sales commitments. By doing so, all would be working with and for growth
in stainless use, without jumping on the boom-or-bust wagon that can only
do lasting damage to confidence in stainless.
[SIDEBAR]
Nickel
Consumption by Application
Stainless steel mills: 62%
Electroplating and
electroforming industries: 10%
Nickel-base and copper-base
alloy manufacturers: 12%
Others (including use in
coinage, catalysts, and batteries): 16%.
Source:
Inco Ltd.
[SIDEBAR]
Worldwide
Apparent Consumption of Stainless Steel
United States:
1973: 1.12 million mt
1986: 1.30
1987: 1.48
1988: 1.65
1989: 1.56
Europe:
1973: 1.5 million mt
1986: 2.43
1987: 2.48
1988: 2.86
1989: 2.7
Japan:
1973: 1.01 million mt
1986: 1.29
1987: 1.48
1988: 1.87
1989: 1.78
Remaining
Countries:
1973: 420,000 mt
1986: 1.2 million mt
1987: 1.49
1988: 1.72
1989: 1.66
Total:
1973: 4.05 million mt
1986: 6.22
1987: 6.93
1988: 8.1
1989: 7.7