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Nickel & ferrochrome surcharge
What it is
Stainless steel is priced as a base price plus an alloy surcharge that passes through nickel and ferrochrome costs, which move on LME and global contract benchmarks. The 300 series contains substantial nickel; 400 series contains almost none
The surcharge mechanism exists because alloy inputs are too volatile to absorb within a fixed price
Impact on industries
- Pass-through protects the conversion margin from alloy volatility, so a stainless producer is not taking a directional bet on nickel
- Timing lags still bite - surcharges reset periodically while inventory is bought continuously, creating gains or losses on the difference
- Nickel volatility distorts demand as buyers defer or pre-buy on expected surcharge movements, so volumes swing on price expectations
- It pushes buyers toward lower-nickel 200 and 400 series grades when nickel is expensive, shifting mix rather than reducing consumption