INSIGHT

What does all this mean for 2023?

If 2022 taught us anything, it is that nothing is linear. Forecasts never account for the unforeseen and, ironically, the most foreseen circumstance we have is that there are always unforeseen circumstances.

Right now, it is impossible to commit to any projections or forecasts – especially for months or even years ahead of the position the industry is currently in, in my opinion. However, we can begin to paint a picture of how the first quarter of this year will unfold:

1. The price of nickel could increase further: The first thing we will see is a gradual increase in the price of nickel, with peaks and troughs in between, due to China’s economic recovery post lockdowns. However, China and Indonesia will possibly increase nickel production by 20% in 2023. This could create a surplus, which would undoubtedly put pressure on nickel prices.

2. Other commodities, like aluminium, could also see price rises: What is possible is that we will see these price increases with nickel reflected elsewhere across the market, with stainless steel and aluminium also seeing price hikes. Where it has smoothed off slightly in the UK is that a lot of stainless steel and aluminium is imported from the Far East and traded in dollars. After initially plummeting to a two-year low, as a result of the disastrous UK Government mini-budget, the exchange rate has recovered and the UK is getting more for its money again – albeit at rates that are still as high as we have seen for a long time.

Container rates have also dropped back to pre-pandemic levels. You don’t have to stretch your memory too far to recall paying US$20,000 for a container. That has since returned to US$2,000 but remains part of the cost of

About The Metals Warehouse

With over 20 years of experience in supplying the manufacturing industry, The Metals Warehouse is an ISO-accredited company that offers a wealth of knowledge, expertise, and an unrivalled inventory of stainless steel and aluminium sourced from reputable mills.

The business’ standard stock range consists of sheets and plates, tread and floorplates, square and round tubes and bars, as well as flat bars, angles, and channels – all available to cut to size. The Metals Warehouse also offers handrail systems and all the fittings that support multiple industries across the UK.

importing stainless steel and aluminium, which is reflected in the final price it is sold for.

3. The correction in stock levels could lead to mills passing on their price increases: With energy costs soaring, the cost of production is considerably higher than it used to be. However, for the latter part of 2022, that price hasn’t filtered down from the mills to the customer – a result of the amount of stock that has built up since the beginning of the pandemic. After initial shortages, there has been so much stock in the marketplace that the mills have felt they haven’t been able to pass on these increases earlier – because they’ve just needed to move the capacity that has been built up. That situation is the same right through the supply chain, filtering down to distributors and customers. Because prices have been going up for the last two years, it has been a rock solid investment to buy more stock than has necessarily been needed. However, that has now changed and stock across the market has nearly been corrected. As a result, we could see the base price from the mills increase in the first quarter.

Final thoughts

Over the longer term, it’s hard to predict what will happen with the price of these commodities. In the UK, it is looking increasingly likely that the country will enter a recession – if it isn’t already in one. If that happens, people will spend less and everything will come down to supply and demand.

If distributors aren’t seeing huge demand for certain products, that is going to make them more competitive to win the business that is on the table. By this, I mean we cut our margin and the price falls. The first quarter of 2023 has a lot of uncertainty surrounding it. The prices are almost certainly going to be rising, but how that then runs through from whatever businesses have paid, to the price they sell it at, is anyone’s guess.

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