How the Nickel Shortage is Impacting the Foodservice Industry: What You Need to Know

June 8, 2022

Every business has felt the sting of the supply chain chaos that has stretched across the globe over the past two years. We’ve all had to pivot and adjust and think outside the box to keep our heads above water.

In the foodservice industry, the shortage of stainless steel has cut deeply, causing delays or unavailability in parts and new equipment, and in some cases pinching margins harshly. Contributing to the volatility of pricing of stainless, is the extreme fluctuations of the alloys that make stainless steel, especially nickel.

Why the nickel market matters to the food service industry

Nickel is a key alloy in the making of many foodservice equipment. These grades are T201/T301/T304/T316L.  Although 430 does not contain nickel, we have seen the monthly surcharge double in less than a year. This increase in surcharge is mostly due to near record high prices of chrome and iron.

As the demand for stainless steel has risen since post Covid lockdowns, the domestic mills have turned their focus on producing more 304 and less 201 and 430. The demand for 201 and 430 now outweighs the supply, forcing manufacturers to much higher costed T304.

Stainless steel and nickel on the world stage

Tariffs remain in place for anyone looking to import material into the USA. In the case where companies have imported in to this country, the material is costed much higher than domestic suppliers.

In recent months, sanctions on Russia following the country’s invasion of Ukraine and COVID lockdowns in China have disrupted the world’s stainless steel and nickel supply chains even further. Bloomberg News stated that Russia’s invasion of the Ukraine (a previously large exporter of stainless) could “turn steel into a luxury commodity.”

An additional blow to the industry was the sudden skyrocket in the price of nickel. In March 2022, the price of nickel jumped as much as 250% in two days and briefly reached a whopping $100,000 per ton. The metal is a key component of high-grade stainless steel and is also used to make items including car batteries, appliances, surgical instruments, exhaust pipes and vehicle chassis.

Some good news about nickel pricing seems on the horizon. According to Karen Norton, a senior base metals analyst at Refinitiv, “This spike had little to do with the market’s fundamentals, even considering the potential for disrupted supplies from Russia as a result of the crisis. It may take time for prices to find their equilibrium again, but we see no reason for them to stay higher than they were before this vertical move.”

Are there any alternatives to stainless steel in food service applications?

Although it may surprise you, the answer is yes. “Even though we are not really sure about how long-lasting the drastic increase in nickel pricing will be, restaurants and others in the foodservice industry should certainly be thinking about alternatives to stainless steel,” says Chance Hunt, product manager for LTI. “The supply chain issues surrounding stainless steel will not end any time soon. Fiberglass can be a competitive alternative for counters in a number of settings.”

At the very least, “we can expect a continuation of delays and reduced availability of stainless steel in this already fractured supply market,” said Hunt. “So, think about such choices as laminate finishes and solid surfaces for countertops, like Corian, or quartz. LTI can also create some very attractive vinyl wraps for serving counters.”

How can your business navigate the stainless steel and nickel supply chain issues?

  • Build a cushion of at least six weeks into any design plans or maintenance requiring stainless steel
  • Plan for price increases when compiling a budget
  • Order in advance for parts/steel you know you are going to need down the road
  • Consider alternative materials during the design phase, with such materials as: fiberglass, stone, Corian, and vinyl
  • Chat with LTI to learn more about alternative materials

Continuing the discussion of stainless steel and nickel supply chain issues

LTI will press forward to navigate the muddy waters of this ongoing crisis that continues to affect the foodservice industry. We are in this together! If you are looking for solutions or alternatives to your next project, LTI can help you think outside the box. It’s what we do! Contact LTI for Solutions