10 June 2022 – Steel scrap is increasingly becoming a strategic resource internationally, which countries and steel producers jealously defend. After the EU plans a defacto export ban on steel scrap, South Korea now also wants to keep steel scrap in the country as a strategic resource. And who actually still trades in nickel? This is a legitimate question, considering that since the nickel chaos in March 2022, trade in this important raw material has plummeted by up to 90% on the LME and SHFE.
Steel scrap becomes a strategic resource
Now South Korea is also planning to declare steel scrap a strategic resource. At the behest of EU steel producers, the European Commission had already changed its Waste Shipment Regulation into a de facto export ban on metal scrap, especially steel.
Cars, buildings and structures
South Korea wants to keep more steel scrap from cars, buildings and other structures in the country and create legal incentives and requirements to do so, according to government sources Thursday.
EAFs need steel scrap
All over the world, there are efforts to keep steel and other metal scrap in the country. The background to this is that, due to the green transformation, steel production needs to be transformed in the direction of Electric Arc Furnaces (EAFs). The EAFs, unlike the classic Blast Oxygen Furnaces (BOF), produce significantly fewer climate-damaging green house gases such as CO2.
Steel scrap in hot demand
The fact that steel scrap is becoming increasingly sought-after can also be seen from the fact that the major steel producers have begun to invest intensively in processing and trading in scrap. Not only in Europe, but worldwide. Indeed, the use of high scrap rates in EAF production not only reduces the amount of CO2 emitted, but also reduces energy consumption compared with the processing of Direct Reduced Iron (DRI).
Where is nickel actually still traded?
Yesterday we already referred to the fact that nickel prices seem to be undervalued since March 2022. A look at the Shanghai Future Exchange (SHFE) data now also raises the question of where nickel is actually still being traded, or whether nickel futures have had their day?
SHFE nickel trading slumped by 90%
Traded nickel volume on the SHFE in May 2022 is down about 90% compared to November 2021. And compared to February 2022, only about 1/4 of the volume traded. Year over year, just 13% of what would otherwise have been traded remains.
LME nickel trading down 80%
Looking at the trading volume on the London Metal Exchange (LME), only 20% of the usual nickel trades are closed there. Also, the nickel stocks of the LME continue to decline and are already scratching the 70,000 lots mark.
Does anyone actually still trade nickel?
This drastic decline in the trading volume of nickel futures makes one think. And even if the looks are directed again and again to the prices at SHFE and LME, these are to be estimated nevertheless no longer as realistic. Because no real trading seems to take place there anymore.
Nickel seems to be on its way to becoming a regularly traded commodity whose market price is determined by supply and demand – and we know that nickel is not available in abundance.
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Disclaimer: Many things here represent our opinion. Others are information from the Internet. We can therefore never claim to be correct or complete. And never base a business decision solely on the news you receive from us.