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MRC Global is the chemical industry's source for a complete range of PVF products in carbon steel, stainless steel and special alloys.
Andrew R. Lane
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Andrew R. Lane has served as our president and chief executive officer since September 2008. He has also served as a director of MRC Global Inc. since September 2008.
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Demand for stainless steel and alloy PFF is expected to continue to rise through 2020 due to two key factors. The first is an increase in demand, and the second is the price for several commodities that are important to the production process of these specialty products.
MRC Global is tracking 3,300 CAPEX and maintenance projects set to kick-off in 2019 and 2020. Construction of new natural gas-fired plants is occurring throughout the US following coal-fired plant closures. Due to the nature of these plants, which rely heavily on heat, steam and pressure, the demand for specialty PFF will be predominantly in 300 series stainless and duplex materials.
One of the key indicator commodities for specialty and alloy PFF prices is nickel. In the first quarter, nickel prices were on a slow upward trend. We expected that to continue through the rest of 2019. However, since August, the nickel price has been increasing more aggressively than expected because the Indonesian government announced a ban on the export of nickel ores (which mostly go to China). Indonesian officials have declared that the country will ban ore exports on January 1, 2020. Nickel ore inventories in Indonesia are somewhere between 600 million and 700 million tons, and estimated nickel ore reserves are close to 2.8 billion tons. Nickel ore demand is also expected to more than triple from the current annual rate. Even If Indonesia continued free exports, the proven reserve would only be enough to last seven to eight years. In the days leading up to this announcement, nickel prices increased substantially, peaking at $8.47 per pound on September 2, 2019.
In recent years, production of refined nickel decreased as stainless steel producers, primarily in Asia, preferred lower cost nickel pig iron. Mine production in countries that supply direct shipping ore to nickel pig iron operations increased, while mine production supplying refineries tended to decrease. China remains the world’s largest producer by far with a total tonnage of 657,900 in 2018, followed by Japan at 81,405 tons and the Russian Federation at 49,000 tons.
Another strategic commodity is molybdenum. China is the largest producer of molybdenum, accounting for approximately 37% of the global output. The US and Chile also own large molybdenum deposits. Overall production of molybdenum decreased slightly during 2019. While the outlook could be volatile, prices are generally expected to continue to rise for the remainder of 2019 and over the next several years.
Tariffs and anti-dumping lawsuits have also created inflation in the US. Section 232 and a succession of lawsuits against importing countries caused widespread inflation during 2018 and into 2019. We do not expect to see more legal action but the inflation has stayed in the market.
Increasing demand from the active automotive and construction sectors is the key factor driving the expected global growth in stainless steel. However, a prolonged trade war between the US and China will most likely result in a tighter stainless steel and alloy sector characterized by competitive pricing outside of the US.
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