Stainless steel and nickel rebounded impressively this month, gaining 5.6% from a low of 72 in April. The monthly stainless MMI® registered a value of 76.
3-month London Metal Exchange nickel rose in April, after falling as low as $12,200 per metric ton, the lowest levels since 2009. Technically, this recent price increase is nothing to be concerned about, at least yet.
Nickel prices fell as much as 40% from October to April so a 5.6% increase this month seems just like a normal price reaction after a significant fall.
For the first time in nine months a weaker dollar and more stable oil prices are giving some short-term momentum to commodity prices. Nickel certainly benefited from this in April, as did most of the base metals we track. If weakness in the dollar continues, nickel prices could keep rising in this second quarter but momentum will likely vanish before prices are able to make a significant move.
Demand Not Helping Prices
End market demand seems to be robust in markets such automotive and residential appliance, although it's still weak in the energy market due to low oil prices. However, a moderate growth in stainless steel demand won't likely help move prices up too much this year. Service centers have excess inventory and that is putting pressure on US mills. This glut of inventory is a big contrast from last year when lead times went above the standard, causing service centers to look for alternative sources.
As my colleague Katie Benchina Olsen pointed out recently, until service centers reduce their inventory backlogs and nickel prices start to improve, service centers will not buy, regardless of price. Service centers need to focus on getting their inventories in check before they resume anything resembling regular buying patterns. However, the mills are under pressure to book capacity and that could put more pressure on prices if they are not able to think longer-term.
What This Means For Metal Buyers
Nickel prices went up this month but that should not panic nickel buyers. Prices could keep rising in the second quarter as the dollar weakens but the outlook for the balance of the year remains bearish.