Alloy prices are driven mainly by three things: the cost of the alloying additions (above all nickel and chromium), the energy and transport surcharges applied by the mills, and lead times. This piece sets out how each was moving through spring 2022.
Nickel costs
Nickel is the most expensive alloying addition across the range, so any change feeds through to the metal price very quickly.
In early March the London Metal Exchange (LME) index had been climbing steadily towards $25,000/T. It had risen for more than two years, with the rate of change increasing as the world emerged from the effects of Covid and the supply-demand balance shifted. The price then spiked to $44,000/T and then $101,000/T in the space of a day before trading was suspended. This was associated with the action of various traders rather than underlying demand. It took more than three weeks for orderly trading to be restored and for steel mills to re-issue price lists, with nickel then trading at more than $33,000/T.
The LME index has since drifted down towards $28,000/T, so the nickel element of the mills' alloy surcharges will reduce over the next couple of months. There is typically a lag between the LME index and alloy surcharges, reflecting the time it takes to buy and consume raw materials in the steelmaking process.
Nickel price volatility affects duplex and super duplex stainless steels far less than most other alloys. They contain just 5% nickel, compared with 8% for Alloy 316L, more than 12% for Nit50, and 45-65% for nickel-based alloys such as Alloy 625, 718, 725, 825, 925 or K-500.
Chromium costs
Chromium is the primary addition that turns a steel into stainless steel, with a minimum of 10.5% required to form the protective passive layer. It is added as ferrochrome, whose price rose dramatically from February 2022 onwards.
Ferrochrome is mined predominantly in South Africa, with significant deposits in Turkey, Kazakhstan, India and Finland. It is not openly traded on the LME, so pricing information is less visible. Heavy rains and flooding in South Africa disrupted mining activity, but rising energy costs are the main driver: ferrochrome is produced by refining chromite ore in an electric arc furnace, which consumes large quantities of expensive electricity.
The price of ferrochrome rose by more than 50% since February. A regular 316 stainless steel contains 18% chromium, a duplex 22%, super duplex 25%, and most nickel-based alloys 18-23%, so ferrochrome increases were feeding into the May-onwards alloy surcharge.
Energy and transport surcharges
Mill production orders remain subject to energy and transport surcharges. Though much smaller than the alloy surcharge, adding up to 5% of the total delivered price, they continue to nudge upwards.
Lead times
Mill lead times are generally 7 months plus for most stainless steel and nickel alloys. Smaller diameter bars, or alloys needing re-melting or additional heat treatment, may take longer. The longest lead time product in the stock programme is currently 18 months, but this is an exception, and there are considerable incoming deliveries through May and June 2022 as part of routine re-ordering.
There are several ways to manage sourcing requirements and reduce uncertainty over cost and availability.
| Alloy category | Approx. nickel content |
|---|---|
| Duplex / super duplex stainless steel | ~5% |
| Alloy 316L | ~8% |
| Nitronic 50 | >12% |
| Nickel alloys (625, 718, 725, 825, 925, K-500) | 45-65% |