Speculation is driving the stainless steel market higher. Although global demand is growing, there is insufficient impetus in the major consuming regions to justify the huge increases in raw materials costs. The USA, western Europe and Japan together account for about half of global stainless consumption, and real demand in all these regions was fundamentally sluggish last year. End-use industries for austenitics, like construction and appliances, were unexciting. Of course there is growth in stainless demand elsewhere, especially China. There has been a sizeable reduction in global nickel stocks, and the metal’s price rose by 130% during the last year. There is also a considerable amount of conjecture in the market. It was speculative dealing that pushed LME nickel through the USD 17,000 per tonne level in early January, and the price quickly subsided again. With stainless production and real consumption set to continue growing this year, the downside for the nickel price, and hence for alloy surcharges, looks quite limited.
