Did you know that Class 1 Nickel, which is traded on the LME, is hardly used for stainless steel?

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Did you know that Class 1 Ni (cathodes and briquettes) that are traded on the London Metal Exchange are a form of Ni that is hardly used for stainless steel production?

LME Ni Prices are used to calculate alloy surcharges even though other Ni types are used in reality.

Class I only bears a share of 11%, the lowest volume of all Nickel sources used in stainless steel. Especially in Europe and North America Class I nickel is only seen as “the last resort”.

Scrap and nickel pig iron, however, are the dominant sources, and both of them are expected to further gain on importance in Stainless Steel production in the years to come, while the Class I share will continue to shrink.

Still, LME Ni Prices are the reference for all Ni types. Does that make sense? If you look at e.g. Ni in scrap is calculated on an LME nickel base minus discount, even though the share of Class I nickel in STS production is minimal.

Also for laterite nickel ore, which is being used for the production of NPI, the minimum price in Indonesia is related to LME Ni pricing.

It is obvious that the system has some flaws, as recent events have shown, with prices for Nickel moving to over 100,000 USD/t and disruptions in trading. If you look at the share of Class I nickel compared to the overall nickel supply, it seems that the tail is wagging the dog. We are clearly in a shortage of Class I nickel rather than having a general supply issue. But still it is the only system to make stainless steel and related raw material input prices today.

So the question is, could there be a different mechanism for pricing in the future? Probably similar to the producer price system as we already have it in molybdenum and chromium?

This topic and many more will be discussed in the weeks to come. Subscribe to the stainless club news, join our conferences and seminars and be amongst the first to know in case there are some changes.