High nickel price threatens substitution: IISI

LONDON (Reuters) - High nickel prices are prompting users to look for alternatives to stainless steels that contain the metal, the International Iron and Steel Institute said on Monday.

"When the price of anything goes up, substitution takes place," Ian Christmas, Secretary General of research group the IISI told the Reuters Global Mining and Steel Summit in London.

Nickel is added to stainless steel to make it corrosion-resistant. Types of stainless which contain high levels of nickel are known as austentic grades, and these are most at risk from substitution.

"Most of the growth in stainless has been in austenitic. Use has been growing rapidly in domestic appliances, but with the price of nickel at $50,000, it's a hard sell," Christmas said.

Nickel for delivery in three months MNI3 hit an all-time high of $50,800 per tonne at the London Metal Exchange earlier this month -- more than three times its price three years ago.

Large-scale substitution is so far still a threat rather than a reality because product designers cannot easily switch from one material to another.

"Why have we not seen it yet? It takes a long time to re-design and re-specify," Christmas said.

Some stainless steel products, such as pipes used in highly toxic environments, cannot do without high levels of nickel, but there is scope to use cheaper materials where nickel is not critical.

"For certain applications, there isn't a substitute material," he said. "But in washing machines, if you go past a certain point, it will go back to plastics."

Last week German's largest steelmaker ThyssenKrupp (TKAG.DE: Quote, Profile, Research, Stock Buzz) said the high price of austenitic grades was leading to a "serious discussion for substitution" in favor of cheaper ferritic grades, which contain no nickel.

Major nickel producers include Norilsk Nickel (GMKN.MM: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), CVRD (VALE5.SA: Quote, Profile, Research, Stock Buzz)(RIO.N: Quote, Profile, Research, Stock Buzz) and BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz)(BHP.AX: Quote, Profile, Research, Stock Buzz).