Chromium, nickel and stainless steel

Demand for chromium and nickel remain strong, but the two metals, essential alloy constituents of stainless steel, have little else in common, writes Roskill of London in two new studies.

Chromium heads any list of strategic metals because of continued heavy dependence on supplies from South Africa, writes the minerals marketing information firm. Nickel, on the other hand, is, in theory, in plentiful supply from “safe” sources; prior to 1988, surplus capacity and low prices were the rule for many years.

The gyrations of the nickel market early this year caught nearly everyone off guard; like tin before it and copper and aluminum later, nickel was caught up in price movements typical of the more volatile of minor metals.

Less dramatically, the pattern of supply of chromium is shifting. Still dominated by South Africa, supply from other sources — Albania, Turkey and India — grows year by year. Albania has become the second largest exporter of the metal (with China as its main market).

Ferro-chrome prices rose to record levels during the spring of this year. In the United States, the price of high-carbon ferro-chrome containing 4-6% carbon increased from 42-44 cents (US) per lb in mid-1987 to 90 cents during the second quarter of 1988, and spot sales as high as 98 cents were reported in March. Supply tight

Strong demand from stainless steel producers, Roskill says, has led to the tight supply of ferro- chrome. About 75% of non-communist world consumption of chromium ferro-alloys is used in stainless steel, to increase the corrosion, abrasion and oxidation resistance of the alloy.

During 1987, non-communist world production of stainless steel rose by nearly 10% to reach a record level of 8.95 million tonnes; U.S. and Japanese output showed increases of 19% and 12% respectively. Strong demand from the consumer goods and automobile sectors last year, Roskill says, was re-enforced by a revival in demand for stainless steel from industrial equipment manufacturers and the petrochemical industry.

Stainless steel production is likely to stay strong throughout 1988; world output is forecast at 8.75 million tonnes. Planned increases in production capacity should ease the shortage of ferro- chrome and lead to more stable prices in the late-1980s, Roskill predicts.

World production of chromite totalled 10.36 million tonnes in 1986, an increase of almost 30% over the 1983 level. Sky-high price

As most metal market watchers are aware, the nickel price went on a tear this year, hitting $10.84(US) per lb in March on the London Metal Exchange (LME). The rapid and substantial price rise during the first three months of 1988 was in complete contrast to the depressed prices that had persisted since 1980, when the cash price for nickel was first quoted on the LME. Roskill says nickel prices remained low because of a widely reported surplus in the market, attributed not only to over-capacity in the West, but also imports of Soviet nickel.

According to Roskill, the United States ban on imports containing Cuban nickel, lead to a fall in the West’s nickel imports from communist nations in the early 1980s. The embargo extends to U.S. imports of Soviet nickel, on the grounds it might have been produced from Cuban ore.

Non-communist world production of nickel metal, and nickel in ferronickel and nickel oxide, plummeted from 535,000 tonnes to 394,000 tonnes between 1980 and 1982. Its subsequent recovery was protracted and faltering, but the lost ground was slowly regained, and production of nickel rose to 514,000 tonnes in 1987. (Stainless steel producers boosted their demand for the metal significantly last year.)

The deficit between supply and demand which emerged in 1987 worsened in 1988; prices showed record increases and stocks continued to fall. Not only was demand strong, but supply in the West was reduced by the disruption of shipments of ferronickel from Falconbridge’s Dominican Republic facilities.

Objections have been raised (in particular to the sharp price swings) by the industry to a nickel-pricing system based on the LME. Despite the objections, Roskill writes, the role of the LME in establishing a “reference” price which purports to reflect the supply-demand balance now appears to be firmly acknowledged.

Efforts to boost nickel production in Cuba from Soviet plants appears to be paying off. Metals Week reports the country could turn out more than 40,000 tonnes of the base metal for the first time since 1981.

Cuba, which accounts for about 6% of world nickel production, appears to have finally got its Che Guevara plant on track. The facility, for which construction started 12 years ago and which is seven years behind schedule, will have a rated capacity of 30,000 tonnes per year when finished. Metals Week reports the plant’s current production rate is 10,000 tonnes; full production is not expected for at least another year.

All the problems with the Che Guevara plant notwithstanding, the Caribbean nation is planning to build yet another new nickel plant, at Las Camariocas. East European government money is being used to finance the new facility, which will also have a rated capacity of 30,000 tonnes.

Cuba’s reserves are estimated to be 19 million tonnes grading between 0.8% and 1.4% nickel.