Stainless Prices Skyrocket
World shortage drives prices through roof

The massive worldwide boom in stainless use, particularly in China, and shortages in base materials, especially nickel, has meant skyrocketing stainless steel prices.

And as one of the world’s smallest and most remote markets, Australia is feeling the full brunt of the worldwide shortage, with prices in Australia rising faster than elsewhere in the world.

The process started in quarter one 2006, where apparent worldwide consumption of stainless steel flat products increased 10% on the same period last year. This rapidly diminished stainless stocks and saw massive forward orders on mill production.

In addition to this huge demand increase of processed material, resource prices have also contributed to massive input hikes. The Nickel price as quoted on the London Metal Exchange 3 month average, has risen from $13,400/tonne in December 2005 to $24,350/tonne in July 2006 and following another 14% overnight increase in early August is now over US$33,400 per tonne.

Needless to say, this has a massive bearing on any high nickel content grades of stainless steel such as 304, the most commonly used grade in the Australian food service equipment market. And whilst low Nickel grades such as 430 have not experienced the same dramatic hikes, underlying steel prices are also affecting these prices.

The outcome for 304, is that prices in Australia of common gauges and sized coil will have risen by over 60% between April 2006 and October 2006. In May one stainless mill pre-warned Stoddart of these rises and predicted a 62% increase. What seemed like doomsaying has turned out to be dead on.

The big question then becomes – what impact will this increase on material prices have on the catering equipment and fit-out market ?

Stoddart for one, has tried to insulate itself to some of the hikes by purchasing additional supplies of stainless stock before the full effect of the rises had hit, however the quantity of this material is quickly reducing and the full effect of the price rises will soon be felt. With prices for custom-made items such hoods and benches for deliveries beyond September, customers will start to see a significant price hike in the quotes they receive.

The cost of manufacture of catalogue food service equipment is obviously increasing also and any savings we are making by efficiency gains and better procurement will be more than swallowed by the material gains. In cost terms, high 304 material content items will rise by up to 20% on the year beginning prices.

Similarly our supplied items in stainless steel, such as Simply Stainless, are also feeling the brunt of these material hikes. They have already issued us notification of an imminent price rise, that will need to be passed on at least in part.

However, Stoddart is trying to hedge its bets in the hope that, as some are predicting, prices will start to drop in the new year. If this forecast is borne out, the market may have to bear a percent surcharge on certain products during the high cost period.

Using different material grades is of course an option, although a potentially risky one. 304 is proven in kitchen applications for its hygienic properties and its corrosion resistance. Introducing less corrosion resistant grades into certain applications may save on short-term costs but increase risks.

Chinese and other Asian manufacturers are already started substituting 304 with the other grades of stainless steel. Some of these substitutes have significantly reduced percentages of corrosion resisting minerals such as nickel. However many of these are virtually undetectable from 304. Any importers should triple check their product to ensure they are getting what they are paying for.

The next few months will pose a significant challenge for stainless fabricators as they clamber to cover the rising costs of material. Stoddart will try to keep our customers informed of price rises in advance of them happening.