Nickel and stainless steel: a pair of "hateful couples" who are closely connected

Nickel is one of the most closely related products among stainless steel-related products, but its close relationship has declined in recent years.

 

Nickel is one of the most closely related products among stainless steel-related products, but its close relationship has declined in recent years.

 

As the production process is further improved, the probability of the "enemies" of nickel and stainless steel getting back together is getting smaller and smaller. However, nickel is still one of the indispensable and important elements in stainless steel. The relationship between the two will only continue to weaken, but There won't really be a breakup.

 

 

When it comes to stainless steel related products, the one that is most closely related is undoubtedly nickel. This close relationship is reflected in the fact that nickel costs account for 40%-50% of the cost of stainless steel all year round, and in the high similarity of the price trends of the two. In recent years, market practitioners have repeatedly joked about the two "breaking up". However, as the closest partners in the upstream and downstream industry chains, the two play an important driving role in each other's market supply and demand, and their relationship is more like a disconnected connection.

 

Nickel is one of the important alloying elements in stainless steel. As an effective element for austenitization, nickel itself has a certain corrosion resistance and has good corrosion resistance to some reducing acids. The addition of nickel can not only improve the strength, toughness, heat resistance, corrosion resistance, acid resistance, and magnetic conductivity of steel, but also increase the hardenability and hardness of steel. It can be said that the corrosion resistance of stainless steel is closely related to the nickel content. Therefore, the impact of nickel in raw materials on the stainless steel market is the most obvious, and stainless steel is more dependent on nickel.

 

 

The 304 stainless steel with the largest circulation volume in the market and the delivery target of stainless steel futures must contain at least 8 nickels, but 8% of nickel raw materials leverages about half of the stainless steel cost.From the perspective of the changes in the cost ratio of raw materials, the proportion of nickel costs has been declining year by year in the past two years. On the one hand, as domestic enterprises build factories in Indonesia, the return of resources has increased, and the pressure of supply and demand has put pressure on the nickel market, reducing the nickel cost of enterprises in the production process.

 

On the other hand, with low profits, various production enterprises are more inclined to purchase more economical nickel iron resources, which increases the substitution of nickel plates and effectively reduces the cost of nickel.These two reasons have jointly led to a decline in the proportion of nickel costs in stainless steel production.

 

In recent years, with the continuous improvement of production technology, it is an indisputable fact that the cost of nickel has decreased. However, it should also be noted that the national standards of various countries have only slightly adjusted the content of nickel in the 304 production standard, and there has been no significant change. Therefore, the space for its proportion to continue to decline will be significantly narrowed. From this perspective, although the impact of nickel on the cost side of stainless steel has decreased, stainless steel is the most important primary downstream demand industry for nickel, accounting for about 68% of the demand. Therefore, although there are signs of weakening in the close relationship between the two, it is still an inseparable bond between them.

 

 

It is precisely because of this relationship that the price trends of the two are extremely similar. As can be seen from the figure below, at various important change nodes over the years, the trends of stainless steel and the main nickel raw materials, nickel plates, nickel iron, and scrap stainless steel, have basically remained consistent. As upstream and downstream industrial chain varieties, their relevance is unquestionable, but there are differences in the degree of fit between the price trends of various varieties and stainless steel.

 

By verifying the fitting degree through linear regression, it is found that from 2011 to date, the fitting degree of stainless steel and scrap stainless steel has reached as high as 0.91, which can be said to be highly correlated between the two trends. This is mainly because scrap stainless steel, as a link in the nickel and stainless steel industry chain, is both the upstream raw material of stainless steel and the output of stainless steel. It is also an important substitute for nickel, and its trend is closely related to stainless steel; the fitting degree of stainless steel and ferronickel is 0.78, and the correlation between the two trends is also very high. With the more economical application of ferronickel in recent years, the correlation between ferronickel and stainless steel has increased significantly; while the fitting degree of stainless steel and electrolytic nickel is 0.45, it can be said that the correlation between the two trends has decreased significantly, which is mainly due to the substitution effect of ferronickel on electrolytic nickel.

 

 

It is expected that with further improvements in production technology, the probability of nickel and stainless steel, the "enemy couple", reconciling will become increasingly lower, but nickel is still one of the indispensable and important elements in stainless steel. The relationship between the two may only continue to weaken, but will not be truly severed.