January/February 1990
Varied--but Positive--Outlooks Expressed
The scenarios predicted for nickel, stainless steel, and special metals were as different as the metals themselves: more balanced markets at lower prices for nickel and stainless, rapidly increasing foreign capacity for specialty steels, oversupply for ferrochrome, and continued strong demand for titanium. Experts on these metals gathered in Pittsburgh to offer their forecasts at ISRI’s Nickel/Stainless Steel/Special Metals Roundtable.
By Si Wakesberg
Si Wakesberg is a New-York-city-based consultant for the Institute of Scrap Recycling industries, Washington, D.C.
Short-term adjustments in supply and inventory will put the nickel and stainless steel markets more in balance in 1990 and will probably keep prices below the high levels attained in 1988 and 1989. This was the consensus among speakers at the Institute of Scrap Recycling Industries's (ISRI) Nickel/Stainless Steel/Special Metals Roundtable.
The nearly 300 industry members who attended the October meeting in Pittsburgh were buoyed, however, by speakers' optimistic analyses of longer-term market trends. While attendees expressed some doubts about the prevailing strength of the nickel and stainless markets, there were hopes that, despite the recent lower price trend, business would improve. "As a matter of fact," said one merchant, "business is continuing at a fairly good pace, though at lower price levels." Speaker after speaker emphasized that demand should be good next year and that, while production may increase, this would only tend to restore inventories to an adequate level. Said the president of a large stainless steel company: "I believe demand for specialty steel will remain relatively strong for the foreseeable future. … The underlying demand for stainless steel in preference to other materials appears to be increasing." And a Canadian analyst surprised the audience when he said, "$8.00-$10.00 nickel is not out of the question."
Since the special metals discussed--titanium, chrome, vanadium, and columbium--are dependent on the health of the steel and aerospace industries, special metals speakers focused on the market positions of these industries. "Producers of titanium ingot and titanium mill products feel demand will remain strong at least through 1990," said one speaker. Others said the outlook for their particular segments depends on the demands of the steel industry
Stainless Inventory Correction Affecting Nickel
The decline in London Metal Exchange (LME) nickel prices was an accurate reflection of the physical market in the second half of 1989, when nickel's biggest customer, the stainless steel industry, was undergoing a severe inventory correction, said Paul Salzberger, manager of sales and market research, International Nickel Co., Inc., Saddle Brook, New Jersey. "We are experiencing a surcharge-related depletion of downstream stainless steel inventories as a result of declining LME nickel prices," he noted. Looking at the recent supply squeezes in nickel, Salzberger said that about 40 million pounds of output were lost in 1989 because of production problems. This was partly compensated by Russian shipments of about 15 million pounds, he pointed out, but even if more material were to flow in from the Soviet Union, "the best we will be able to manage [in 1989] is a supply/demand balance with no elbow room for inventory replenishment." Salzberger's conclusion: If supply inches up a little while demand inches down a bit, "we may finally have the inventory cushion we were deprived of [in 1988].
The day of the roundtable, the LME cash nickel price was $4.68 a pound. Forecasting an average nickel price for 1990, analyst Oliver Lennox-King, vice president, Walwyn Institutional Research, Toronto, Ontario, came up with a projection in the $4.50-a-pound area (versus an estimated average of $6.15 a pound for 1989). During his talk, Lennox-King said base metal inventories (including nickel) will stay low as the world economy continues to expand and said "metal price acceleration is possible." He pointed out that stainless steel represents 57 percent of nickel consumption, a number that, despite some intermittent dips, moved up in the 1980s. He foresees an era of producer dominance in the 1990s with high individual operating rates, small capacity growth, low substitutional fear, and strong balance sheets.
Specialty Steel Challenged by Rising Foreign Capacity
Foreign specialty steel capacity is growing at an enormous rate, especially in Taiwan, Korea, Mexico, and Finland. This will add "approximately 2.9 million tons [to world capacity]--more than the U.S. industry's total capacity and more than the United States consumed in record-breaking 1988 and 1989," said Robert Heaton, president, Washington Steel Corp., Washington, Pennsylvania. Much of this new capacity, he indicated, is being installed with "direct or indirect government support," and the products likely will be "dumped or otherwise traded unfairly."
In addition, raw material prices have been extremely volatile, he said. "Scrap prices play an important role in determining specialty steel producers' costs," he noted, pointing out that U.S. stainless scrap exports rose 55 percent in first-half 1988 and first-half 1989. While the specialty steel boom of 1988 slowed in the second half of 1989, Heaton believes "demand for specialty steel will remain relatively strong for the foreseeable future." As the market descends from the high levels of 1987 and 1988, the long-term outlook for specialty steel is "promising," he said.
Special Metals Watch Stainless and Steel Market Trends
Since demand for chrome and ferrochrome is closely related to stainless steel ingot output levels, chrome's outlook depends on the direction of the stainless market, said Larry A. Pryor, president, AIOC-Pryor, Inc., Sewickley, Pennsylvania. Stainless production in the third quarter of 1989 showed a "significant" drop, he said, and this really reflects the picture of ferrochrome in the United States. "Ferrochrome demand is, on the average, 25 percent of stainless steel ingot production. ... As stainless goes, so goes ferrochrome." Additional ferrochrome capacity has come on stream both in the United States and abroad, Pryor noted, indicating that ferrochrome demand "will approximate 2.45 million tons in 1990." Based on estimates of new production, he said "a considerable oversupply is imminent for 1990, depending on the actual level of demand and whether the expansions actually come on stream on time." Significant oversupply, he pointed out, may push prices down in 1990. He estimated that the price of South African charge chrome will fall in the first quarter of 1990 but that free-market high-carbon ferrochrome values will rise. "However," he said, "I do not see prices going below 55 cents a pound chrome-contained."
Similarly, the ferrovanadium and ferrocolumbium markets depend on steel industry demand, according to James Carter, vice president for ferroalloys sales and marketing, Shieldalloy Metallurgical Corp., New York City. Unlike chrome, however, these metals are added to steel as "micro-alloys" in relatively small quantities. About 86 percent of the world's demand for vanadium comes from the steel industry, Carter indicated. He said vanadium went through a cycle of surplus to severe shortage to balance and back to oversupply between 1985 and 1989. Some panic buying led to high prices for ferrovanadium (U.S. producer prices reached $18.50 a pound), causing some users to switch to alternate materials, notably ferrocolumbium, Carter said. Ferrocolumbium retained price stability in the early 1980s but rose 7 percent in 1988 and 10 percent in 1989. Any downturn in steel output could bring columbium shipments down as well, he said, "however, we still expect stability in overall shipments." He noted that "there does not seem to be an overabundance of scrap, especially 718 scrap, in the market at this time."
Titanium Pins Hopes on Aerospace Demand
For the past two years, producers of titanium ingots and titanium mill products have enjoyed the best business volume since 1980-1981, said Kenneth I. MacLeod, president, Frankel Metal Co., Detroit. "At the same time, sellers of titanium scrap have probably enjoyed the best business since the record year of 1980." MacLeod estimated that demand for titanium ingots and mill products "will remain strong at least through 1990." This strong demand, he explained, is based on commercial aircraft production, which continues at a record pace in the United States and Europe. Pointing to higher U.S. sponge output, MacLeod predicted that domestic producers will be able to meet future demand. MacLeod foresees price stability for recycled titanium. While prospects for the aerospace industry could be optimistically anticipated by the titanium industry, a dip in steel production might cause a dip in demand for titanium units. Together with the United States and Japan, he stated, the Soviet Union has become a "significant" exporter of titanium scrap.•
The scenarios predicted for nickel, stainless steel, and special metals were as different as the metals themselves: more balanced markets at lower prices for nickel and stainless, rapidly increasing foreign capacity for specialty steels, oversupply for ferrochrome, and continued strong demand for titanium. Experts on these metals gathered in Pittsburgh to offer their forecasts at ISRI’s Nickel/Stainless Steel/Special Metals Roundtable.