Stainless Steel Users Search for Substitute Materials due to High Prices

I usually quote only the beginning or a few paragraphs of these reports but almost everything in this synopsis is important to stampers, so I basically included it all.

Material substitution is always an option for a stamper, but it usually takes a lot of work with the customer designer and the supplier to negotiate a change in raw material. Not something one does lightly, but occasionally necessary when material prices go through the roof.

I know I’ve pointed this out before, but it was months ago … it’s worth mentioning again. I run a small metal stamping shop. We use slide forming machines to get our stamping done. Slide forming machines are more sparing of expensive materials because they, as a general rule, don’t use a carrier strip to get their work done. So there’s less scrap. To check out slideforming some more, follow this slideforming link.

MEPS – Stainless Steel Review

Nickel prices have retreated somewhat from the record high they reached earlier this month. Although the price drew back from crossing the $US30,000 per tonne mark, it remains at over $US27,000 (cash buyer price) at the time of writing. Such elevated prices are causing increasing concern to stainless producers and their customers.

As a result of nickel’s price surge, stainless mills have already announced increased alloy surcharges for August sales. In Europe and North America, surcharges for type 304 flat products have almost doubled since January, and they seem certain to rise again in September. Along with hikes in basis figures, this has propelled transaction values for many nickel-bearing grades to record highs.

Therefore it is not surprising that users of austenitic grades are casting around for alternatives and examining whether they could cut costs by switching to other materials. Stainless producers say they have not witnessed much substitution so far. This is partly because the price of many replacement materials has also gone up significantly.

Among stainless steel’s rivals, copper prices have risen by almost 60 percent so far this year and also stand at record high levels. Galvanized steel sheet prices are currently about 40 percent above those of January, largely because of a 52 percent increase in the price of zinc.

Perhaps the most attractive alternative to stainless is aluminium, where the London Metal Exchange price in late July was a mere 3 percent up on its January figure.

They may be playing it down, but it is clear that some mills are concerned about long-term loss of market share. Stainless producers themselves are offering their customers a range of alternatives in an effort to prevent business being lost to non-ferrous or carbon steel materials. Such options include lower-nickel duplex grades and ferritic types. In the meantime, nickel’s fluctuations will continue to create problems for the stainless industry worldwide.

Copper Rises on Speculation Fed Rate Pause May Boost Demand
Copper rose in London amid optimism that a possible pause in U.S. interest rate increases may help boost demand for metals. Nickel and zinc also advanced.

Nickel is used extensively in Stainless Steel. Some chinese produces of SS are cutting back. That may help in a while. The article contains more details.

Phelps Dodge to buy Inco, Falconbridge for $40B US

Boy, it’s merger week in the metals sector. First Arcelor and Mittal, now this:

Yahoo! Finance
Canadian mining companies Inco Ltd. and Falconbridge Ltd. have reached a three-way deal to merge with Phelps Dodge Corp. of Arizona in what would be the biggest takeover in Canadian corporate history.
The companies said Monday the union would create the world’s largest nickel producer and largest publicly traded copper producer.
The new company will be named Phelps Dodge Inco Corp. Its corporate office and copper division will be headquartered in Phoenix, while Inco Nickel, the new company’s nickel division, will be based in Toronto.

Stainless Steel Price Forecasting

Rising nickel costs ensure that stainless steel transaction prices will increase over the next three months in all parts of the world. Expanding figures for ferrochrome and molybdenum over the same period are also a real prospect. We are bullish about stainless steel prices in the period to September, at least. We forecast a further 19 percent increase in our benchmark 304 cold rolled coil price over the next four months. Over that period, supply is likely to remain quite firm – at least in Western nations.
We have reservations about the prospect of this market continuing at the current level in the medium term. Production is starting to rise to meet current orders – a large proportion of which are speculation against rising raw material costs. As the third quarter develops, we expect to see a reduction in the volume of mill orders. This is likely to be followed by lower demand for nickel, chrome and molybdenum and a correction in their selling prices is anticipated in the final trimester or, perhaps, earlier.

Speculation is contributing to recent metal prices, not fundamentals

In what should be no surprise to readers here (I’ve been saying this for a while), MEPS says the markets are actually not serving metal suppliers and metal consumers well.

See this paragraph excerpt from a larger document.

The recent roller-coaster ride in world commodity markets does not bode well for steel futures. Prices for non-ferrous metals have been driven up to record highs by pressures that have less to do with the basics of supply and demand, and more from speculation by investment funds. In mid-April the inevitable correction took place and metal prices tumbled – for nickel and zinc by as much as 7 percent in a single day. This was attributed purely to “sentiment�. Market fundamentals had not changed significantly. The world steel market measures more than 1,000 million tonnes. It would be absurd to have the price of this physical metal determined by dealings between financial speculators who have their own agenda.

Copper Leads Metals Rally as Record Prices Fail to Curb Demand

This is not good new for stampers of copper or brass parts trying to keep a steady price for their customers.
Copper soared above $4 a pound for the first time and nickel and zinc rose to records on signs that higher prices have done nothing to curb demand. Gold climbed to a 26-year high and platinum jumped to the highest ever.
Stockpiles monitored by the London Metal Exchange fell the most in five weeks, as makers of wire and pipe tapped inventory to make up for a shortfall from mines. Strikes and declining ore grades in Mexico and Indonesia have cut copper output this year. Demand will climb 5.7 percent this year after rising 1.8 percent last year, according to Citigroup Inc.
[…] a London-based analyst said. “Every day I’m stunned as prices keep going up.”

Copper Heads for 6th Weekly Gain on LME Amid Supply Disruptions

More about Copper Latin America
Copper headed for a sixth consecutive weekly gain in London, the longest period of rising prices since October, driven by supply disruption and speculation demand growth may accelerate. Nickel rose to the highest since at least 1987.
Production stoppages at Grupo Mexico SA, the world’s seventh largest copper producer, continue at its zinc and copper operations. The company said this week it may not be able to deliver the metals to customers in May. Industrial production in China, the world’s largest copper consumer, expanded 17.8 percent last month after gaining 20.1 percent in February.

And this, from Reuters, news that some additional capacity might be coming on-stream.
China’s Xiangguang Copper Co. Ltd. aims to start production at its new copper plant in early July but has no time table to start work on its planned expansion, company officials said.

And finally, some speculation as to when Copper might fall again – hey, I made a joke – speculation seems to be becoming a factor in the Copper marketplace.

Copper won’t defy gravity forever

The blistering rally in copper prices may start to cool later this year as new production finally comes on stream, but most analysts are not expecting a big correction anytime soon.

As miners from Chile to China ramp output to grab a piece of the commodities boom, supplies of copper could begin matching demand later this year and next.

Because of high demand for the industrial metal, thanks to the relatively robust world economy, copper has appeared resistant to any downside risk.

The world’s big investment funds, who have no intention of ever taking delivery of the metal, have been piling in to grab big returns for their portfolios, and driving up the prices in the process.

Indeed on Thursday, precious metals suffered a correction with gold sliding 4 percent and silver losing 14 percent. But while copper wobbled, it ended the day only a fraction lower and by Friday was up $54 at the bid price of $6,350 a tonne.

But most market players don’t believe copper can defy gravity forever.

AK Steel to Raise Aluminum Coating Prices

AK Steel Holding Corp., a maker of carbon, stainless, and electrical steels, said Tuesday it will raise its prices for aluminum coatings by 50 percent due to high aluminum costs.
AK Steel said the price hikes take effect April 1 and will be added to the company’s current pricing extras for all aluminized carbon and stainless steel products.

Here are some cute update-themselves graphs of aluminum pricing:

[Most Recent Quotes from]

Unfortunately, it won’t produce cute charts of longer terms, but you can see them by clicking this link.

As you can see from the longer term graphs (follow the link above), aluminum prices have doubled since 2002. This trend, repeated in copper, steel and nickel prices, shows that we can no longer take for granted the plentiful and cheap availability of these metals. The underlying factors in all cases is a wide-scale (delayed) industrial revolution in large areas of what we once called the third world. This has the ability to outstrip mining efforts for these metals and, at least in the short term and perhaps for a good long time to come, will drive up demand and therefore prices.

Now the good news, at least for aluminum, is that recycling is relatively cheap, aluminum is a low-melting point element, but even still, the scrap is worth a small fraction of the original price. Better not to make scrap at all.

In this way, certain less-wasteful processes, like slide forming, will likely become more prominent in the next few years, as the true costs of waste metal becomes increasingly obvious.

Stainless Steel Prices on the Rise

Stainless steel producers from Japan in the east to Kentucky in the west seem to have decided that they have had enough of falling prices and are acting to reverse the downward trend. The first few weeks of 2006 have seen a flurry of announcements of intended selling price rises.

It is quite unusual for producers in Asia, Europe and America to go for price hikes all at the same time. Three factors have prompted this unusual unanimity. First, price weakness has affected all major markets. Second, Chinese production of cold rolled stainless is lower than had been forecast – thus reducing fears of excess supply. Third, alloy costs are on the rise.

Between January and December last year, basis prices for grade 304 cold rolled stainless coil (excluding raw material surcharges) fell in many of the world’s principal markets. The drop was relatively minor in the US. However, in Europe the price went down by 25 percent.

Last year’s cuts in production seem to have brought a bit more balance to the supply-demand picture. We estimate that crude stainless output in the second half of last year slipped by at least 12 percent in Europe and the Americas. Output also appears to have fallen in Asia, though more modestly.

The prospect of rising alloy surcharges next month has encouraged buyers to come back into the market to rebuild their depleted stocks. Mills, therefore, seized the opportunity. Among the first to move was Arcelor’s subsidiary Ugine & ALZ, which is proposing a €50 per tonne basis price increase from February and another €50 per tonne rise in March. Other European mills are following a similar line.

In the Americas it was NAS which led the upward move – announcing plans to raise basis prices by about 3 percent effective March 1. This is the first such attempt in 18 months, and was followed by other major producers.

In Europe and America the mills will have the challenge of pushing through basis price hikes at the same time as alloy surcharges are rising. This is a practical proposition if the cost of nickel continues to increase for several months. However, this latest order burst could be short lived if nickel prices start to retreat once again

New alloy could boost next generation jet fighter

The next generation of jet fighter aircraft could fly farther and faster thanks to a new high-strength aluminum alloy prepared at the U.S. Department of Energy’s Ames Laboratory. The new alloy is one material being developed for use in the F-35 Joint Strike Fighter, a cutting-edge aircraft that will see widespread use as the primary fighter for the U.S. Navy, Air Force, and Marines as well as U.S. allies abroad.
Researchers at Ames Laboratory’s Materials Preparation Center will produce about 400 pounds of an aluminum-yttrium-nickel alloy over the next few months that will serve as a benchmark for testing and to help refine commercial production techniques. The material is being developed […] to replace heavier or costlier components in the “cool” sections of jet engines. The material also could be used in other parts of an aircraft such as wing spars.
If the new material performs up to expectations, it could have a dramatic impact on the performance and efficiency of both commercial and military aircraft. Jones said that Pratt & Whitney engineers estimated that replacing various components in one particular jet engine with the Al-Y-Ni alloy could potentially lighten the engine by 350 pounds. That’s an astronomical weight reduction in aircraft design, where engineers are typically happy to reduce the weight of components by a few pounds here or there.
“It means being able to carry significantly more fuel or payload,” Jones said. “It could also mean lower production costs,” pointing out that a bulkhead currently milled from a solid block of titanium for the JSF takes months to fabricate.