November 2021
Having historically been the largest demand source for nickel, the stainless-steel sector still dominates global nickel demand, and it is expected to continue to do so.

The global stainless-steel market was valued at ~US$105.67bn in 2020, with the Asia-Pacific region leading the regional market share. Increasing energy demand and vehicle production and a rise in construction activities in emerging economies are expected to boost the demand for stainless steel. While all the current hype is focused on the batteries sector as a significant driver of potential growth in nickel demand, in reality, this is more of a long-term outlook. At present, the volumetric nickel demand from the batteries sector remains only a blip in the industry, especially compared to the massive demand from the stainless-steel sector. In recent months, demand from the stainless-steel sector has continued to be exceptionally strong, owing to the continuing implementation of post-pandemic government stimulus intended to promote economic recovery, particularly in China. This stimulus has placed a lot of emphasis on infrastructure and construction, which require a significant amount of stainless steel, in turn boosting nickel demand.

We All Know Stainless Steel…Or Do We?

Stainless steel has been in use for more than one hundred years. It comprises a wide range of iron-based alloys which, unlike conventional steel, are resistant to corrosion and do not rust when exposed to water alone. The alloying element that makes steel ‘stainless’ is chromium. More than 10.5% chromium needs to be added to steel to allow the formation of the protective oxide film that provides its corrosion resistance and bright, silvery appearance. While chromium is essential, the addition of nickel is what has enabled stainless steel to become such a versatile alloy. In addition to their inherent corrosion resistance, nickel-

containing stainless steels are easy to form and weld; they remain ductile at very low temperatures and yet they can be used for high-temperature applications. Stainless steels can come in many different grades, depending on the alloying elements added to produce the desired balance of corrosion resistance, mechanical properties, and cost. There are over 150 grades of stainless steel, with the majority consisting of the 200, 300 and 400 series. Classifications are as follows:

200-series – Austenitic grade, ‘chrome-manganese-nickel’ alloy.  

300-series – Austenitic grade, ‘chrome-nickel’ alloy—the most common stainless steel.

400-series – Ferritic grade, no nickel added.

Combined, the nickel-containing austenitic stainless steels make up nearly three-quarters of the stainless steel produced today.

The 200-series stainless steel was largely developed because of high nickel prices. To offset the amount of nickel required, manganese was added to improve the strength of the product. It therefore has a higher manganese content and lower nickel content than the 300-series material. The 200-series stainless steel can be produced with the comparatively low nickel grade in nickel pig iron (NPI) produced by blast furnaces.

In Relation to Nickel

AME currently forecasts the total finished nickel demand for 2021 will be ~2.9Mt of contained nickel. AME estimates that ~70% of this demand will come from the stainless-steel sector, ~20% from other alloying applications and just 7% as nickel sulphate from battery applications. The remaining 3% comprises nickel sulphate used for other purposes, predominantly nickel plating and pigment production.

China has kept the top spot as the largest stainless-steel producer in the world, accounting for ~59% of global stainless-steel production in 2020. Due to the sheer size of China’s steel capacity, the country is the largest demand source for finished nickel, accounting for 57% of the total global demand at ~1.6Mt. The country’s recent property and energy crises seem to have done virtually nothing to dampen its stainless-steel sector, or, by extension, its nickel demand.

Ever since the announcement of the Indonesian ore export ban in 2014—with the ban subsequently implemented in 2020—there has been a flurry of Chinese companies shifting their nickel pig iron and ferronickel capacity to get a foothold in Indonesia. Additionally, huge EAF-based stainless-steel production capacities taking advantage of these raw materials—pioneered by Chinese companies such as Tsingshan and Delong—have been built at the ferronickel hubs in Indonesia, setting the country on track to become the world’s second-largest stainless-steel producer after China, according to the projection by the International Stainless Steel Forum (ISSF).

In 2021, Indonesian finished nickel demand is forecast to be 392kt, while production is forecast to be 869kt. This is a sharp increase from five years prior in 2016, when there was virtually zero nickel demand and only 116kt finished nickel production in the country. The massive increase in finished nickel supply and demand in Indonesia is driven by demand from the stainless-steel sector, not the batteries sector. The battery material sector is more likely to be targeted by the new high-pressure acid leach (HPAL) plants, most of which are still being developed. While stainless steel capacity development is taking place in Indonesia and is expected to continue to rise, exports of ferronickel—predominantly to China—also continue to grow, feeding the country’s ever-increasing appetite for raw materials and continued growth in steel production. Ferronickel from Indonesia (>10%) is suitable for making 300-series stainless steels, which typically have a final nickel content of 8-10%.

Supply Woes

Despite rigid demand, China is scaling down its steel sector—which produces 10-20% of the country’s carbon emissions—in a declared bid to curb pollution. The restriction of stainless-steel production will continue at least until the end of the year, so output will be difficult to increase. Due to the impact of power rationing, the country’s domestic NPI plants have limited production, and their output has declined severely. Therefore, the current market supply of high-grade NPI is tight and prices are rising, causing the cost of stainless steel to rise.

China has also raised tariffs on steel-related exports in an attempt to prioritise domestic supply with the reduced output. For instance, the tariff on ferrochrome, a stainless-steel ingredient, has doubled from 20% to 40%. With several Chinese companies already offshoring their nickel operations and stainless-steel capacities following the Indonesian ore export ban, more Chinese companies are expected to ‘offshore’ emissions-intensive industries as a way around both the Indonesian nickel ore export ban and the country’s carbon emissions targets.

China’s squeeze of the world’s supply of steel suggests that shortages of many products will continue until post-pandemic demand and supply stabilise. In the meantime, the supply squeeze, coupled with the ever-growing demand for stainless steel, is expected to keep stainless-steel and nickel prices elevated. While there is a lot of narrative around nickel demand growth coming from products suitable for the batteries sector, in the short to medium term, the volumetric driver for significant nickel demand growth will remain the stainless-steel sector.