European stainless steel prices continue to fall relative to the costs of constituent raw materials. The pricing system “base plus surcharge for alloy” was canceled for most transactions between manufacturers and major buyers, such as large distributors and stockists. However, plants continue to publish their surcharges for alloys. Therefore, you can calculate the nominal base price by subtracting the additional alloy from the "effective price".
In several cases this year, the value of transactions increased less than the increase in published surcharges for alloys, or fell more than a decrease in the announced indicators of the plant. In any case, the nominal base price is reduced.
The numbers produced in recent months have fallen far below the numbers that were historically considered the breakeven levels of producers.
The root of this problem lies in the mismatch between the cost of raw materials, in particular nickel, and the demand for finished stainless steel. Traditionally, the production of stainless steel is the largest consumer of nickel. Consequently, demand for the alloy was the main fundamental factor in nickel pricing. Recently, however, the expected future requirements for metal from manufacturers of batteries for electric vehicles have affected nickel prices. This is compounded by limited supply, such as restrictions on the export of nickel ore imposed by the governments of Indonesia and the former Philippines. Consequently, the nickel price has risen this year, which, apparently, does not correspond to activity in the stainless steel industry.
With regard to mitigation, thanks to its modest production volumes, European plants were able to achieve discounts on their costs for stainless steel scrap. Recent reports suggest that they paid less than 60 percent of the domestic LME price for nickel in scrap. Assuming 60% scrap is used in the steelmaking process, this could have recently saved around € 300 per tonne of produced crude stainless steel compared to the full price of nickel on LME.
