The consensus among the speakers appearing at the Nickel/Stainless Spotlight webinar Sept. 15 as part of the Institute of Scrap Recycling Industries (ISRI) 2020 Fall Commodity Spotlight Series was that a full recovery in the nickel/stainless markets following the disruptions created by the pandemic will not occur until 2022.

Nickel prices have been volatile this year, said Natalie Scott-Gray, a senior metals analyst at London-based StoneX Financial Ltd. (formerly Intl. FC Stone). The metal’s price fell 22 percent in mid-March from January levels to reach an annual low of $10,880 per metric ton. As of mid-September, nickel was nearing $15,000 per metric ton. “Despite the V-shaped recovery in the nickel price that we’ve seen, it remains a far cry from prepandemic levels that were forecast for the metal. Prices this year were set to average $17,000 per [metric] ton,” she said.

Sean Davidson, founder and CEO of Davis Index, Toronto, said London Metal Exchange (LME) nickel prices ranged from $14,500 to $15,500 per metric ton over the last 30 days as of mid-September. “Of course, this was a welcome recovery for the industry” from the lows seen during the pandemic-related lockdowns.

“Higher nickel prices invariably mean higher stainless steel scrap prices.” – Sean Davidson, founder and CEO, Davis Index

“Higher nickel prices invariably mean higher stainless steel scrap prices,” he added, saying scrap processors expect prices to remain strong through October.

However, Davidson said he prefers to look at spreads because they offer “a much clearer picture of the fundamentals that drive pricing.” He mentioned 316 solids, which were trading at 11.2 percent of LME nickel in mid-September. In February and March, 316 solids were at 12.3 percent to 12.4 percent of the LME price, he said. In May, that spread was closer to 14 percent.

Davidson said that even though stainless demand and production fell during the lockdown, scrap supply fell more acutely. “Scrap supply relative to demand was actually much tighter. Throughout August and September, the percentage spread of stainless scrap prices relative to nickel have improved,” as have margins, he added.

Stainless steel mills are building inventory ahead of a very uncertain winter that includes the U.S. presidential election and the possibility of increased COVID-19 transmission, Davidson said. “There are too many unknowns.”

Nickel supply and mined production were hit worse than originally anticipated by the pandemic, Scott-Gray said, noting that mined nickel production declined 8 percent from the first quarter to the third quarter.

Refined nickel output, however, followed a different trajectory, having risen 3 percent during the same period, Scott-Gray said. This increase was driven by robust Indonesian output, giving that country 25 percent market share up from 6 percent in 2016.

Stainless steel production, which accounts for roughly 70 percent of nickel consumption, declined 8 percent year over year from the first quarter of this year to the third quarter, its lowest level since 2017, she said. However, mills have been shifting to produce more nickel-intensive 300 series stainless, which is increasing nickel demand.

Davidson said stainless demand is expected to decrease from 18 to 25 percent in 2020. In 2021, stainless demand is expected to increase from 10 to 15 percent, with a full recovery not occurring until 2022, he added.