LME Nickel Price Drop Drags March’s Stainless Steel Index: Has It Found a Floor?

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The monthly Stainless MMI® continued its long descent from Mount Kilimanjaro and registered a value of 78 in March, a decrease of 3.7% from 81 in February. The nickel price drop has now lasted 10 months since its meteoric early 2014 rise.

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Nickel is hovering around its lows of 2014. We believe that these lows ($13,400 per ton) are an important level to watch.

Stainless_Chart_March-2015_FNL

Most analysts agree that nickel’s fundamentals remain positive, at least on the supply side. The Indonesian authorities haven’t changed their minds and the ban on exports of nickel ore to China there hasn’t changed. The flows of material between the two countries have disappeared.

Philippine NPI Supply Surge

A surge in nickel ore supply from the Philippines and the fact that China’s nickel pig-iron producers have built up significant quantities of stocks prior to the January 2014 ban compensated for the supply decrease. Indeed, the ore ban in Indonesia led to a 37% increase in nickel mining in the Philippines last year. One Filipino nickel miner even announced an IPO. It seems as if it’s just a matter of time until we see some impact on NPI production rates.

Aluminum vs Nickel since 2010

Aluminum vs. Nickel since 2010. Source: MetalMiner.

Although most analysts are focusing on the supply side, we believe that the key for the nickel price is directly related to nickel’s demand expectations. Those expectations are low at this point, and this is weighing down nickel prices.

Our analysis points to the behavior of commodities and the industrial metal industry group together making up over 60% of the specific metal price. This is the reason why we are seeing many industrial metals hovering near record lows as well.

In the chart above, we can see the similarities between aluminum and nickel. In theory, aluminum has strong fundamentals, too, but we see that both metals have fallen near lows after a good rally in 2014.

What This Nickel Trend Means For Metal Buyers

Indonesia’s export ban is there, but what happens to nickel prices from now will likely depend on the commodity market. The nickel price might be punished regardless of the supply constraints. Prices may continue to decline no matter what happens on the supply side.

Exact Price Movements: This Month’s Stainless MMI®

* Get the complete prices every day on the MetalMiner IndX℠

The Allegheny Ludlum 316 stainless surcharge fell 7.9% to $0.87 per pound. On the LME, the nickel spot price closed the month at $14,040 per metric ton after dropping 5.0%. Following a 4.8% decline, the nickel 3-month price reached $14,095 per metric ton on the LME. Chinese primary nickel prices fell 3.7% to $16,841 per metric ton after rising the previous month.

Chinese 304 stainless steel scrap prices increased from CNY undefined ($1,494) to $1,510 per metric ton last month. Chinese 316 stainless steel scrap saw its price rise 0.8% to $2,085 per metric ton.

At a price of $1,750 per metric ton, Chinese ferro-chrome did not budge the entire month. Chinese ferro-moly traded sideways last month, staying around $13,102 per metric ton. Chinese 304 stainless coil experienced a flat month, staying around $2,668 per metric ton. Hovering around $3,787 per metric ton for the month, Chinese 316 stainless coil remained unchanged.

The Stainless MMI® collects and weights 14 global stainless steel and raw material price points to provide a unique view into stainless steel price trends over a 30-day period. For more information on the Stainless MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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