Why Russia’s invasion of Ukraine is likely to raise costs for restaurants and food manufacturers
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The price of the metal nickel has been volatile for the past couple of weeks, given that a lot of it comes from Russia. And those recent price gyrations are going to be felt in the restaurant and food industries. That’s because nickel is an important component of much of the stainless steel that’s used to make food-prep vessels, surfaces, and utensils.
Stainless steel has a few special qualities. A big one is its cleanability.
“Stainless steel minimizes microstructural cracks, crevices or valleys, where bacteria can hide,” said Abby Snyder, a professor of microbial food safety at Cornell University.
She said that’s because stainless steel is durable, more resistant to sanitizers and high heat. It doesn’t easily crack. It’s hard to chip. It’s not absorbent.
These are just some of the reasons why the food industry relies on stainless steel.
“Stainless steel can also be welded in house by the maintenance staff of food plants. So material that can’t be fabricated or machined as easily, that would be a big draw back for the food industry from a functional perspective,” Snyder said.
Stainless steel prices were rising even before Russia invaded Ukraine as the food service industry started picking up again.
Analyst Panos Kotseras follows the stainless steel market at the research company CRU Group. He said other industries have been competing for stainless steel, too.
“Really the market that absolutely boomed since the lockdowns were lifted, were domestic appliances. This is where we saw very, very strong demand for stainless steel,” he said.
These were appliances like dishwashers and breadmakers. Kotseras said Russia’s invasion of Ukraine and the effect it’s had on nickel prices will probably cause the price of stainless to rise even more.
“Our expectation is that in the second quarter of this year, we are likely to see a 7% increase in prices, from the first quarter of this year,” he said.
This has had Nico Freccia paying close attention. He’s the co-founder of 21st Amendment Brewing in the Bay Area.
“All of our tanks, all of our piping, all of our fittings, and spare parts, are all stainless steel. And then don’t forget kegs,” he said.
Freccia said his tanks are big, expensive pieces of equipment, and he hasn’t had to buy any new ones recently.
But those pipes, fittings and kegs have to be replaced and maintained regularly.
“Even if you’re pretty much static, there is an ongoing need for stainless steel items at all times in the brewhouse,” he said.
If stainless steel prices rise further, Freccia said there’s not a lot he can do to mitigate the cost.
“There isn’t another item that you can swap out. You can’t use aluminum, you can’t use plastic, you can’t use other types of metals,” he said.
So, Freccia said he’ll keep an eye out for used parts and equipment.
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