Nickel and its effect on 304 Stainless Steel Bolts

It is well known that nickel has a dramatic affect on stainless steel prices, but without knowing the cost factors of a stainless steel mill, the exact price affect is impossible to determine. However, we can supply an example of how nickel costs affect a standard stainless steel product.

Background

For an example, we will look at the fastener distribution industry. There are primarily two ways an original equipment manufacturer can obtain stainless steel fasteners in the United States. One is to buy from a manufacturer, either domestic or overseas, or more common, a distributor, a general line distributor, or one which specializes in fasteners. That distributor has three primary options to obtain fasteners. To purchase from a domestic manufacturer, to import mill shipments directly from overseas manufacturers, or purchase from master distributors in the United States.

When it comes to stainless steel fasteners, there are only a few distributors large enough, or willing to take the risk involved with importing huge volumes necesary for mill shipments from overseas, without firm commitments from a customer base. On standard fasteners, US fastener manufacturers simply can not compete. These days, US manufacturers primarily concentrate on the special fastener market, or supply distributors selling to the government, which requires US made product most of the time. So if few are importing, and US makers can not compete, where are all the stainless fasteners coming from? Primarily a hand full of master distributors that import stainless steel fasteners in large quantities, and sell broken box quantities thru distributors.

The Example

In 2001, the cost of nickel averaged $2.70/per pound. This is the price it averaged on the London Metal Exchange, and the actual price a mill would have paid for nickel would have been higher than this. Yesterday, September 26th, the cash price for nickel was $13.38/per pound.

250 pieces of a 1/2-13 X 1-1/2 Hex Bolt 304 Stainless Steel will contain a minimum of 8% nickel. These 250 bolts weigh approximately 26.5 pounds. Therefore, in 2001, the "raw material cost" of these stainless steel fasteners would have included a $5.73 nickel cost (26.5 pounds x.08% nickel X $2.70/lb). These same 250 bolts made today would include $28.36 nickel cost (26.5 pounds X .08% X $13.38/lb). Thus the raw material cost has seen "one ingredient" increase by 80% or X4.95 in 5 years.

Chromium, which makes up a minimum of 18% of the same 250 bolts, has increased from $.30/lb to $.75/lb during this same time period. The overall raw material cost of the ferrochrome for the raw material part of these 250 stainless bolts has increased from $1.43 to $3.58, much less of an overall effect than the nickel.

Update - March 18, 2008 (since we posted this article in 2006, the price of nickel has risen to as high as $23.50/lb, and fallen, and is now back to about where it was when we posted. But ferrochrome has recently gone ballistic. As of today, it is selling for nearly $5/lb. Using $4.50/lb, the ferrochrome would now add $21.47 to the above 250 bolts... not the $3.58 it did when we posted in 2006. That is a 600% increase in a few short weeks!)

Again, without having access to the raw material cost that mills actually paid and are paying, it is impossible to use this to prove the industry standard, that states nickel can be responsible for up to 60% of the cost of stainless steel. Maybe a steel mill out there will tell that side of the story someday.

But we can use this example to show the dramatic affect nickel has had on the end cost of just 250 304 stainless steel bolts.