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.


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.

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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.

Our Stainless MMI didn’t move for the third-consecutive month. Despite a momentary recovery in commodity markets (thanks in part to the recent rally in oil prices), nickel prices were unable to move up.

Free Sample Report: Our April Metal Buying Outlook

Although some industrial metals, such as steel and tin, moved up in Q1, important metals such as aluminum, copper and nickel are all lagging badly in this base metals rally. That gives the rally less credibility and makes us think that markets could pullback as soon as momentum vanishes.

Trade Case

The biggest headline in the U.S. involves Chinese stainless, cold-rolled-anti-dumping and countervailing duty investigations. The U.S. International Trade Commission made a unanimous preliminary determination on March 25 that unfairly-traded imports of stainless steel sheet and strip are causing injury to U.S. stainless producers. The petitioners were AK Steel, ATI’s Flat Rolled Products Division, North American Stainless and Outokumpu Coil Americas.


With the threat of anti-dumping petitions looming, Chinese mills have been canceling open orders with U.S. customers, pushing domestic lead times for cold-rolled stainless steel beyond 8-12 weeks. For Q2, steel mills are in “controlled order entry” mode, trying to ensure volume for their key customers. With higher lead times and while China is under investigation, domestic mills are seeing the opportunity to increase stainless base prices. That could help support prices short-term, particularly if strength in the metal complex continues, which remains questionable.

Longer-term, U.S mills need to be mindful of any price increases as long as international prices remain low. Global nickel supply is still running strong as the supply side has proved quite inelastic to low prices with most producers hanging on while they hope Chinese pig iron producers will close first. Moreover, demand is not improving and stocks remain at elevated levels, which could prevent any market deficit and translate into tangible tightness.

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Stainless domestic mills have the natural advantage of short lead times due to proximity but when domestic lead times rise, metal buyers might prefer importing and if they do so successfully, domestic mills might have a hard time winning that business back.

Russia’s Norilsk Nickel’s Earnings Sink

Another headline in March was when Russia’s Norilsk Nickel, the world’s second-largest nickel producer, reported a 24% decline in 2015 core earnings (in spite of a weaker dollar offsetting losses) and forecasted global primary nickel consumption to remain flat this year.

Outokumpu Changes Freight Equalization Policy

Recently, Outokumpu Coil Americans announced changes to its equalized freight schedules. Bright annealed and rolled-on finishes will have the most significant increases since the point of equalization has been changed to San Luis Potosi, Mexico. This will amount of at least a $.05 per pound increase in these products.

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stainless-nickel-L1Nickel mining in the Solomon Islands remains at a standstill with the nation’s highest court ruling that neither of the two Japanese and Australian miners vying for a license are entitled to one.

According to a report from Reuters, the Solomon Islands Court of Appeal this week rejected Sumitomo Metal Mining‘s appeal that the local government was in the wrong to cancel its license to develop the Isabel nickel laterite discovery five years ago.

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With that same ruling, the Court of Appeal struck a blow against Sumitomo’s competitor Axiom Mining by revoking its license for the Isabel site, as well. The two mining companies have been fighting over the Isabel discovery since 2011, the wire service stated.

“We will look closely into the court’s decisions and think about what steps we would take next,” a spokesman for Sumitomo Metal Mining told the news source.

Keep an Eye on Nickel Prices

Although metal prices have improved overall in 2016, the most liquid and watched of metals, nickel, is not leading the move and remains near multiyear lows.

In other metal price news, sharp increases have been seen in CRC and HDG, raising some warning flags. We are also seeing a broad recovery among industrial metals, thanks in part to a weaker dollar and higher oil prices, according to Lisa Reisman, executive editor, MetalMiner™.

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.


Few metals have confounded investors and market analysts more than nickel. Indonesia’s ban and a perceived high cost base to China’s nickel pig-iron market have, for some years, led many to believe a rise in prices was only just around the corner.

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But Nickel prices have remained hugely depressed and stocks of refined metal have continued to rise. Nickel prices slumped to a 13-year low last month and still remain below levels last seen in 2008-09, according to the Wall Street Journal. In spite of prices being so low that virtually no producers are believed to be making money, capacity isn’t being closed fast enough to have any impact. At the heart of the problem is slowing demand in China as the below graph from the WSJ shows

According to the WSJ, stainless steel production in China is projected to show no growth until 2020, and, indeed, has been more or less flat, fluctuating either side of a line, for a number of years.

Indonesian Ban

Part of the rationale for higher prices was lack of ore when Indonesia significantly reduced exports of unrefined metal, but China had been stockpiling ore for some time and when the crunch came simply switched to the Philippines for ore supply. Since then, refined imports have been substantial but Citi Corp. is quoted as saying “We believe a significant proportion of the 258,125 metric tons of refined nickel imported into China over the first 11 months of last year was used for collateral financing rather than real demand,” The Shanghai Futures Exchange’s rising stock levels support this, underlining the lack of end users, which an be easily read as stainless steel production demand.

Source: WSJ

Source: WSJ

China’s NPI producers have responded to both low nickel prices and soft demand from the domestic stainless steel market as imports of nickel ore contracted by 26.3% in 2015 and are down by around 9.6% year-over-year in 2016 so far. Read more

Our Stainless MMI remained steady at 51 points. However, we currently see some factors that could lift prices in the short term.

Stainless Anti-dumping Case

On March 4, the U.S. Commerce Department launched an anti-dumping and countervailing duty investigation into Chinese imports of stainless steel sheet and strip, for possible illegal subsidies and selling prices at below cost to illegally gain market share. A preliminary determination of injury to U.S producers is scheduled by March 28.


China’s Ministry of Commerce didn’t respond well to the this new case, arguing that simply restoring prices via protectionist means is not the solution. Chinese steel firms have already been impacted by trade cases. Recently the Commerce Department had imposed 266% preliminary duties on imports of cold-rolled steel from China, punishing Chinese steel makers for dumping or selling below cost. In December, China received a dumping margin of 266% on corrosion-resistant steel products.

Compare Prices With The February 2016 MMI Report

These tariffs have helped U.S. imports come down this year. That led to lower inventory levels here and have given U.S. mills the ability to rise prices. Steel prices climbed over the past few weeks, and stainless prices could follow. With the threat of anti-dumping lawsuits looming, the volume of imported stainless sheet and strip had already been diminishing, which should be seen in the upcoming months. The lack of imports has already pushed out domestic lead times and could create a supply shortage once service center restocking starts. However, it’s still questionable whether prices will hold just on import tariffs alone. Low international prices will add downside pressure if stainless domestic prices rise, especially since China is the only named party.

Nickel Prices Could Rise Short Term

Nickel is the worst performer among base metals this year. However, we are seeing some price strength in the industrial metal complex that could push nickel prices higher in the short term, especially if the US dollar continues to weaken.

Indonesia’s energy minister said in February that the country could ease the ban on nickel ore exports. Indonesia was China’s top nickel ore supply country prior to the ban, which enabled the Philippines to catch up.

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Back in 2014 when the ban was implemented, nickel was trading above $15,000 per metric ton. However, Indonesian companies didn’t expected that nickel would be trading today at half that price.

Indonesia Might Ease Export Ban

Because of falling nickel prices, many of the smelters that miners intended to develop have not materialized. Now, the government is going to review its export ban policy as miners struggle and Indonesia´s smelting capacity will not be sufficient by next year amid miners’ unwillingness to develop those costly smelting operations.

The removal of the export ban would add more nickel supply to international markets, possibly driving prices down while demand is weak, especially in the energy sector.

What This Means For Metal Buyers

Stainless prices could experience a short-term bounce on new import tariffs and overall strength across the base metal complex. However, prices will likely struggle to rise longer term while demand remains weak and producers don’t cut production in a big way.

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On Monday, hundreds of Nevada Tesla Motors workers walked off their jobs at the giant battery factory that the company is building in the desert outside Reno, Nev. It wasn’t your typical picket: They weren’t protesting bad working conditions, or making a show of force around contract negotiations. Rather, they were protesting other workers — specifically, the fact that they were from New Mexico and not Nevada.

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“Tesla got $1.4 billion in tax incentives to promote Nevada’s construction sector, not New Mexico’s,” said Todd Koch, president of the Building and Construction Trades Council of Northern Nevada.

That’s only half true, though. Tesla and Panasonic, its partner in building the $11 billion “gigafactory,” only have to satisfy a 50% local hiring requirement in order to win the billions in tax breaks Nevada offered it to get the factory. According to the most recent audit, 68% of the workers on the project are from Nevada — even though contractor Brycon Construction is, indeed, based in New Mexico.

Free Sample Report: Our February Metal Buying Outlook

stainless-nickel-L1The World Bank has forecast a 15% decline in nickel market prices, which means uncertainty for one Finnish mine that produces nickel as its main output.

Terrafame, the state-owned company operating the Talvivaara mine in eastern Finland, has reinforced that it will stick to its optimistic price projections for nickel and move forward with its business and financial planning despite the World Bank’s projections.

“Our business plan is based on (nickel prices) rising to about $16,000 per metric ton by 2020, which is the World Bank’s forecast,” Terrafame board chair Lauri Ratia told Yle News in August. “If we stick to this framework, then we will be able to achieve a positive cash flow by the end of 2017 into 2018.”

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The World Bank recently adjusted its nickel forecast from summer 2015. Last month, World Bank estimated the nickel price in 2020 would be about 15% lower than they projected it would be last year. However, Terrafame is holding strong on its positive cash flow projections for 2017-2018 despite the World Bank’s updated forecast.

Not a Good Start to 2016 For Nickel

Of all industrial metals, nickel fared the worst in 2015 and it continues on that path two months into 2016. Our own Raul de Frutos stated that other industrial metals were stabilized by the weaker dollar in February, but that was not the case for nickel.

“Not even a weak dollar stopped nickel from hitting new lows,” de Frutos wrote on February 17. “Three-month nickel traded down to $7,550 per metric ton last week, its lowest level in nearly 13 years.”

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.