nickel

stainless-nickel-L1Nickel ore shipments from the Philippines could be in trouble after a new president’s appointment of an anti-mining presence that could spell disaster for Chinese buyers.

According to a recent report from Bloomberg, President-elect Rodrigo Duterte is prioritizing the nation’s stance on mining by appointing a new head for its environment department. This maneuver has the potential to disrupt supplies to buyers in China.

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The London Metal Exchange echoed those concerns as nickel closed up nearly half a percent this week, indicating this new government will limit nickel ore exports.

“We might see an imminent crackdown on the Philippines’ small mines,” said Sam Xia, an analyst at China Merchants Futures Ltd. “This will reduce its nickel ore exports, including to China.”

The Philippines is now a key supplier of nickel ore to Asia’s leading economy after Indonesia stopped shipments in January 2014. Meanwhile, China’s nickel ore imports from the Philippines increased to 3 million metric tons this May, its highest point in seven months. That figure accounted for 97% of its total purchases.

Nickel Hits Six-Week High This Week

Our own Raul de Frutos recently highlighted that nickel prices hit a six-week high following a notable recovery from May’s price sell-off.

de Frutos wrote: “The metal benefited from a positive swing in investor sentiment toward commodities in June, stemming from a weaker dollar and the ongoing recovery in oil prices. Nickel has climbed steadily after hitting multiyear lows in February, but the move isn’t big enough to impress the market yet.”

You can find a more in-depth nickel price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

 

 

 

Nickel prices climbed to a six-week high, a nice recovery after May’s price sell-off.

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The metal benefited from a positive swing in investor sentiment toward commodities in June, stemming from a weaker dollar and the ongoing recovery in oil prices. Nickel has climbed steadily after hitting multiyear lows in February, but the move isn’t big enough to impress the market yet.

3M LME Nickel hits 6-week high

Three-month London Metal Exchange nickel hits a six-week high. Source: MetalMiner analysis of FastMarkets.com data.

Chinese Ore Imports Falling

Nickel ore is the essential ingredient for China’s massive nickel pig-iron production sector. Imports for the first four months totaled 4.16 million metric tons, a 38% decline compared to the same period last year. Indonesian imports have been non-existent since the country imposed its exports ban on unprocessed minerals. Although the Philippines has managed to fill part of the gap, it hasn’t been enough. Read more

Similar to copper, nickel is not metal investors’ favorite child right now. While oversupply is still and issue, only a weaker dollar and further Chinese stimulus could lift prices. However, that wasn’t the case during the month of May, driving prices down. Our Stainless MMI was no exception, falling 4%.

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For the past six months, every time three-month London Metal Exchange primary nickel approached $9,500 per metric ton, prices fell short. It happened in March and again in May.

Stainless_Chart_June-2016_FNL

Recently, Russia’s Norilsk Nickel, the world’s largest nickel miner, said that in order for a sustained recovery to happen, more cuts will have to materialize. That’s a very unusual statement for a metal producer as they tend to talk up the market. According to the company, over 20% of the global nickel supply needs to be cut if we want to see a sustained recovery in prices.

If Norilsk has it right, it will take some time until we see a significant recovery in prices since, so far this year, there hasn’t been any supply cut announcements. The latest significant production cut was announced late in 2015. Despite its non-optimistic outlook, the company is moving ahead with the development of new projects. Norilsk Nickel is still profitable, aided and abetted by co-mined minerals and the depreciation of the Russian Ruble.

U.S. Prices Buck Global Trend

Not only Norilsk but producers that are loss-making at current prices seem redundant to shut down capacity. Glencore and fellow Australian miner BHP Billiton have recently said no more than they “may” close capacity at Murrin Murrin and Nickel West, respectively.

Here in the U.S., however, anti-dumping actions are having an effect and stainless, cold-rolled prices have been steadily rising this year. The three base price increases for 2016 have been firmly implemented on spot business. Although contractual business may have been protected from immediate base price increases, the next contract periods will definitely reflect the higher base prices.

U.S. mills have been trying all year to recoup unrealistically low base prices from 2015. The anti-dumping and countervailing duty actions filed by U.S. stainless mills against China have solidified the base price increases as well as disrupted the supply of several niche products.

All 200, 300 and 400 series alloys have been impacted by the 2016 base price increases. The three stainless base price increases for 2016 have cumulatively impacted 304 stainless base prices by at least $0.10 per pound on base gauge and almost $0.13 on 22 gauge. 430 stainless has risen by close to $0.08 per pound. 409 has risen by $0.06 per pound. Several sources speculate that there could be another round of increases on the horizon because U.S. cold-rolled stainless supply is tight.

U.S. Supplies Tighten

Mill lead times remain extended with North American Stainless (NAS) maintaining a controlled-order-entry mechanism. Some service centers also report that the light gauge stainless is limited and available only for customers who also place base gauge volumes.

Buyers of metal need to have well-established supply chains for all of their cold-rolled stainless products. NAS and Outokumpu Coil Americas remain the core suppliers of austenitic commodity products.

Two Producers Inherit Commodity Stainless Market

AK Steel is not focused on nickel-bearing commodity stainless grades. Allegheny Technologies’ Flat-Rolled Products segment continues to seek higher-value stainless and has limited its exposure to commodity stainless.

In theory, Allegheny and AK Steel could relieve some of the long lead times metal buyers are experiencing, but their mill capacity is focused on supplying other products or has been idled. The anti-dumping and countervailing lawsuits against China have impacted the Asian supply of cold rolled stainless. For instance, Taiwanese rerollers using Chinese hot band for bright annealed have limited new offers.

POSCO, which has South Korean and Vietnamese stainless mills, is being cautious with offers into the U.S. market. Bright annealed and light-gauge, cold-rolled stainless remain the product categories most impacted by the trade cases.

Compare Prices Wtih The May 2016 MMI Report

Stainless flat-rolled pricing remains poised for further base price increases. Stainless demand is expected to remain around the same volume in the U.S. The trade cases against China are proceeding in a multitude of steel products, not just stainless. Although domestic mills are capable of producing more stainless volume, the appetite for AK Steel and Allegheny does not appear to be there yet. Until then, NAS and Outokumpu will be the core commodity stainless producers. Metal buyers will need to look to alternative sources for niche products and perhaps should look to European mills such as Aperam or ThyssenKrupp AST as Asian importers are spooked by the trade cases against China.

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Nickel prices are, finally, on the move.

Owners of shares in nickel mines shouldn’t start popping the champagne corks just yet, it’s going to be a slow burn rise but the landscape appears to be shifting and it is because of, as usual, China. First and foremost, there is a trend among stainless producers this year, particularly in China, to produce more 300 series nickel-bearing grades than last year.

Real Demand is Up

Just as mills and consumers shifted wholesale from 300 to 400 series grades when nickel prices went through the roof in 2010-11, a prolonged period of falling prices has encouraged consumers and designers to switch back to higher-quality grades.

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Macquarie Bank is quoted by Reuters saying global nickel demand will grow by 4.4% this year, largely on the back of a predicted 4% rise in Chinese 300 series stainless production. Likewise, the INSG estimates the global market will fall into a small 600-ton deficit in Q1 of this year, although it must be said the market remains well supplied by huge global stocks. Read more

Steel imports into the U.S. were down in April and, if the numbers are able to be believed, China is importing more nickel ore than ever before.

Steel Imports Down in April

Based on preliminary Census Bureau data, the American Iron and Steel Institute reported that the U.S. imported a total of 2,456,000 net tons of steel in April 2016, including 2,014,000 nt of finished steel (down  5.6% and  4.1%, respectively, vs. March final data).

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Year-to-date through four months of 2016 total and finished steel imports are 9,982,000 and 8,442,000 nt, respectively, down 34% and 33% vs. the same period in 2015.

Annualized total and finished steel imports in 2016 would be 29.9 and 25.3 million nt, down 23% and 20% respectively vs. 2015. Finished steel import market share was an estimated 24% in April and is estimated at 25% on the year-to-date.

Key finished steel products with a significant import increase in April compared to March are line pipe (up 38%), hot rolled bars (up 35%), structural pipe and tube (up 27%), standard pipe (up 17%) and cold-rolled sheets (up 15%).

Chinese Nickel Imports

China is importing more nickel than ever before. Headline imports of refined metal hit a new all-time record high of 49,012 metric tons in April. The cumulative tally of 157,600 mt over the first four months of the year represents a 115,000-mt increase over the same period of last year.

Free Download: The May 2016 MMI Report

Reuters’ Andy Home writes that there is too much going on to get a good idea of what the imports really are and where they’re being used.

stainless-nickel-L1Nickel, along with copper, rallied over the past week due in part to relatively mild demand from the consumer industries.

According to a report from the Business Standard, traders are accounting for scattered demand from these industries leading to the rise in both nickel and copper prices.

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In a recent report from our own Raul de Frutos, all industrial metals have enjoyed a rally-intensive 2016 with the exception of one month: January. That was when the same metals hit new lows. So what is to account for this rebound? Is it worth noting or simply a mirage?

“Some metals — such as steel, zinc and tin — have gained significantly while others such as aluminum, copper, nickel and lead haven’t made much progress yet,” de Frutos wrote. “The price rally is not really being driven by supply cuts but by a combination of a weak dollar and the sugar rush of China’s stimulus, initiated late last year. We could be witnessing the end of this five-year-long commodity bear market, however, there is something rotten about this rally.”

Raul added that China’s stock market is the most accurate barometer for its economy and, ever since 2011, its stock market along with its commodity prices, have fallen. So what could appease our worry about this particular metals rally?

De Frutos concluded: “A good start would be China’s stock market rising above April’s levels. Otherwise, metal bulls can only hope for a choppy market.”

You can find a more in-depth nickel price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

 

This week, the market heard some words of wisdom from Norilsk Nickel’s vice president Pavel Fedorov.

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Very unusual for a metals producer, instead of talking up the market, Fedorov gave a very candid assessment, reported by the Financial Times, of metals markets in general and the nickel market in particular.

Until producers begin to behave rationally, he said, prices will remain depressed for the foreseeable future. Pointing to the state of demand in the world’s largest nickel consumer, China, Fedorov said about a third of current Chinese stainless steel capacity was unsustainable due to a slowdown in real estate demand while Macquarie Bank is quoted as saying Chinese stainless steel demand is likely to fall a further 7% in the first quarter of this year from the same period a year earlier and that demand is not going to come back.

No Shutdowns Yet

The only rational reaction to reduced demand is to cut supply, if producers want prices to recover, which will bring with it profitability and a return for shareholders. In part, producers are recognizing this new reality and assets are being written down.

Glencore wrote down its nickel assets last year contributing to a $5 billion loss, but in spite of writedowns Glencore and fellow Australian miner BHP Billiton have said no more than they “may” close capacity at Murrin Murrin and Nickel West, respectively, even though they are losing money at current prices.

Yet Norilsk is Still Profitable

Indeed, Norilsk’s comments are all the more interesting because the company is not suffering losses as a result of the low prices, just loss of better profits. The world’s largest miner has a cost of production currently below $8,630 per metric ton price levels, aided and abetted by co-mined minerals and the depreciation of the Russian Ruble.

Almost in provocation, Fedorov is quoted as saying that due to the value of its Talnakh deposit in the Russian Arctic — which contains some of the world’s largest concentrations of platinum, palladium, gold, copper and silver — the company could “theoretically stockpile nickel and still make money.”

Betting on the long term, Norilsk is moving ahead with the development of new projects despite current prices. Last year it is said to have sold a 13.3% stake in its Bystrinsky copper mine in Siberia near the Chinese border to a group of Chinese private equity and other investors. The project is expected to cost $1 billion, the company has said. That’s before it starts production in 2017, adding pressure to the 70% of global capacity that, in Norilsk’s estimation, is losing money at current prices.

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Nickel is not an isolated case. Across the metals spectrum there are plenty of examples of oversupply where prices are depressed and unlikely to recover in the face of weaker demand and excess supply. We are into a new normal but many producers are unable or unwilling to face up to the the implications.

MonthlyMetalBuyingOutlook_May2016_210This month, What appeared to be a rally led by anti-dumping actions involving several different steel products turned into something bigger as China implemented stimulus measures, boosting demand growth not only for steel, but also for the rest of the base metal complex.

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stainless-nickel-L1The Shanghai Futures Exchange (ShFE) is experiencing increased trading of nickel, which is creating a pull on physical units and causing a domino effect on the global refined metal supply chain.

According to a recent column from Andy Home of Reuters, nickel volumes and interest have increased significantly since the metal’s contract launched on the ShFE last March. In fact, volumes have already surpassed those on the London Metal Exchange (LME) which has ruled the wholesale nickel trading market in recent years.

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“The take-away is that although Shanghai nickel may be prone to the same day-trading investment crowd flooding other local markets, its success is founded on bigger, more institutional players who are prepared to hold positions for longer,” Home wrote for Reuters.

It’s also important to note that nickel trading on the ShFE rose so quickly that it created issues in the form of a squeeze on shorts for the July contract last year. This led to the delivery of three brands of Russian nickel in order to satisfy short position holders wanting to settle their positions with physical metal. With this development, both flows and stocks of refined nickel around the world were altered.

Non-Ferrous Metal Update

Nickel, itself a non-ferrous metal, along with iron ore and steel are seeing their prices drop following a decision by the Chinese government to increase trading margins and fees futures exchanges in Dalian, Shanghai and Zhengzhou. In response, the most-traded contracts were down up to 4.6%, according to our own Stuart Burns.

You can find a more in-depth nickel price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

 

With eight of our 10 monthly MMI sub-indexes gaining, and even the other two holding their value, April was the most positive month we’ve seen since 2014.

MM-IndX_TRENDS_Chart_April2016_FNL-TOPVALUE100

We felt a bit like Oprah reporting this month’s prices. You get an increase, copper! You get an increase, aluminum! EVERYONE gets a price increase! Except you, of course, rare earths and stainless, but at least you held your value, eh? That’s progress in your markets. Especially for you, stainless.

Free Sample Report: Our April Metal Buying Outlook

The standout performer (our “Biggest Winner”) was our Raw Steels MMI®, which posted an impressive 8.5% increase, egged on — at least in the U.S. — by anti-dumping measures that have in large part spurred demand for domestic rebar, cold-rolled and hot-rolled coil and even specialty steel. Specifically, the Korean and U.S. shredded scrap prices tracked by this sub-index bumped up significantly, with Chinese and U.S. finished prices also rising for the month.

Our Global Precious Metals MMI® also posted a healthy 1.2% increase on top of its 10% jump in March for an 11% increase over the last two months. This is no thanks to gold, which acted as a drag on the basket – instead, silver and the platinum group metals drove the increase. Global precious is our biggest winner, leading all of the other sub-indexes at 78.

The Rare Earths MMI® is still lagging behind the rally at a lowly 16, making it our “Biggest Loser” this month, but just reporting a month with no price declines is a moral victory after the losses of 2015. Check out the entire report for a more in-depth at all 10 metal categories tracked in the monthly MMI.