Keep an eye out for alternatives to high-nickel content products such as stainless steel. Nickel prices have nearly tripled in the past 14 months and will remain under pressure this year, according to leading market analysts.
Numerous supply disruptions throughout 2006 coupled with rising demand from China created significant pressure on the silvery white metal used to make stainless steel, magnets, coinage, and special alloys, particularly for the aircraft industry. There were cyclones in Australia, a strike in New Caledonia, and mechanical failures in smelting operations in Canada and Indonesia.
The bigger issue, however, is booming demand from China, which is expected to cause consumption to exceed production of nickel in 2007 for the second consecutive year. China produced about 5 million metric tons of stainless steel last year and is building another 10 million metric tons of capacity.
Stainless steel producers are taking steps to protect their own profitability. They are using more stainless steel scrap as a furnace feedstock, reducing their requirements for high-cost primary nickel. Not surprisingly, however, costs of stainless scrap are also soaring. Prices for 304 scrap rose from $1,100 per metric ton to $3,180 per metric ton on the Rotterdam exchange from November, 2005 to late January, 2007. Prices of 316 scrap went from $1,900 to $4,310 in the same time frame. Some Chinese producers are switching to lower-cost nickel ore from the Philippines, in an effort to cope with dwindling nickel stockpiles.
Pundits had predicted that the bubble would implode by early this year. It did not. In fact, prices for cash buyers hit a record $37,875/metric ton on the London Metal Exchange in early February.
What strategies can design engineers take to maintain margins on products they design?
The most obvious is to try lower-nickel content stainless steels. Obviously there is a significant price to pay: Lower nickel steels possess inferior thermal and corrosive resistance. Re-check the thermal and mechanical requirements for your products to see if you can make a switch, at least on a short-term basis.
Also keep an eye on products that can allow a total swap-out.
One example: Ferro Corp., Cleveland, OH, is introducing new coatings that are said to provide the appearance of stainless with the performance of porcelain enamel. Aimed at kitchen applications, such as dishwashers, Ferro says the new coatings are even superior to stainless in some respects. “Unlike stainless steel, Evolution does not show noticeable fingerprints, does not discolor from heat, and is resistant to stains, scratching, and chemical cleaners,” says a Ferro spokesperson.
Whirlpool is using the new coating on a range it is introducing later this year.
Porcelain enamel is a glass that is bonded to metal (generally carbon steel, stainless steel, cast iron or aluminum) at temperatures from 1000°F – 1600°F. It has been used on large and small appliances, cookware and grills, sanitary ware, water heaters, building panels, signage, and chemical storage vessels.
Read Doug's blog post on nickel prices.
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 Whirlpool is introducing a range that uses coated porcelain enamel in place of stainless steel. |
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