The rise of corporate social responsibility in the nickel industry.
By Patrick Whiteway
At the annual meeting of the International Nickel Study Group, held in Lisbon April 23, 2012, Heinz Pariser, a consultant, examined the question "What's new in stainless steel scrap?" The information he presented provides an interesting snap-shot of how well nickel resources are being used by society today. This information can also inform the work of policy makers which influences the environment in which the nickel industry operates so as to improve the utilization of this unique resource. Key among the factors that influence the management of nickel resources is the rate at which it is recycled in the so-called technosphere.
The rate at which stainless steel recycling is growing has increased to 7.9% per year compared with 3.6% for nickel, the most valuable ingredient in austenitic stainless steel.
During the same period (1960-2015) that we have witnessed this long-term success story, the global market environment has changed dramatically, however. Stainless steel production has shifted significantly from the U.S. and the EU to China. These two western economic powerhouses lost market share (from 40% each in 1960 to less than 10% for the U.S. and about 20% for the EU in 2011) whilst China has grabed the leading position in the market in just 20 short years, moving from near zero in 1990 to 40% of the market in 2011. Japan commands about 20% of the market, unchanged from that countrys market share in 1960.
Looking at the 17 largest stainless steel producing companies, Mr. Pariser pointed out that this prosperity has been largely profitless. The weighted average profit (rate of return on sales) for this group of 17 was a paultry 1.8% in the period 2008 to 2011. Jindal reported the highest profit during the period (about 14%) and Nippon Metal the lowest (a loss of about 5%). Noteably, three of the worst performers were European-based firms (Acerilnox, Outokumpu and ThyssenKrupp).
On the demand side, apparent consumption in China has increased recently from about 600,000 tonnes to 920,000 per month in the beginning of 2009 to the end of 2011. Meanwhile, in the U.S. demand has risen from about 100,000 tonnes per month in 2009 to 190,000 tonnes per month in 2011.
In terms of total crude stainless steel melting, China led the way in 2011 at 14,460,000 tonnes out of a global total of 34,089,000 tonnes. That country is expected to melt another 8.3% more in 2012 (15,689,000 tonnes of stainless steel) out of a global total which is expected to reach 35,820,000 tonnes, according to Mr. Pariser.
Europe is the largest source of stainless steel scrap (of the external kind). Since stainless steel is such a durable material, it remains in service of 15 to 20 years. Therefore the 'old' economies, those that have used stainless steel for the longest time, have the highest tonnage of stainless available for recycle because products have finally reached the end of their useful life. Of the 8,145,000 tonnes of stainless available for recycle in 2011 worldwide, about 3,181,000 tonnes came from Europe. China was next (at 1,677,000 tonnes) and NAFTA (at 1,338,000 tonnes).
Traditionally, the availability of stainless steel scrap has been strongly tied to the price of nickel, the most valuable component of stainless steel. So, when the price of nickel fell dramatically in 2009 during the global financial crisis, so to did the availability of stainless steel scrap. Since then, however, availability has outpaced the increase in nickel prices, In fact, availability has continued to grow (to near its pre-2009 peak of 2,400,000 tonnes) despite a steady fall in nickel prices in recent months (to below US$20,000 per tonne).
Stainless steel scrap typically contains about 8% to 10% nickel by weight, which accounts for 70% of the value of the stainless steel. In Euroe and the U.S., the amount of nickel in stainless steel scrap more closely tracks the price of nickel.
In terms of trends in the global trade of stainless steel scrap, South Korea is becoming a major importer (moving from 338,000 tonnes in 2010 to 423,000 tonnes in 2011) whilt competing with China (which moved from 94,000 tonnes to 128,000 tonnes in the same period). The EU and U.S. continue to be the largest exporters.
The recycle content of stainless steel made outside of China is increasing. In China, 37.9% of the total weight of the stainless steel produced in 2011 was derived from scrap. This compares with 49.3% in the stainless steel produced outside of China. Of the approximate 14 million tonnes of stainless steel scrap used globally to make new stainless steel in 2011, about 10 million tonnes were used by producers outside of China.
Producers within China have preferred to use nickel pig iron instead of stainless steel scrap, with negative impacts on the environment where nickel laterites are produced. Since 2005, the amount of nickel in pig iron used by stainless steel producers in China has increased from near zero to more than 200,000 tonnes (for a total growth rate of 82% per year). This accounts for about one-third of the total nickel units used by China's stainless steel producers. For comparison, scrap accounted for about 80,000 tonnes and nickel from 'other' sources (i.e. primary nickel mines) accounted for about 300,000 tonnes.
It is estimated that the cash cost of producing a tonne of nickel in pig iron is about US$20,000 per tonne. Therefore, should nickel prices fall below this, China's stainless steel producers would be pressed to use other sources.