Good news for stainless consumers, the nickel price dropped to its lowest level in six years this week as the London Metal Exchange 3-month nickel price declined $390, or more than 3%, to $12,540 a metric ton according to the FT.
After hitting a high in May of last year on expectations that Indonesia’s export ban would create a shortage, the market has declined as the deficit has failed to materialize. Indonesian supply was simply replaced by increased supply from the Philippines, up 23% in 2014 from a year before.
The Demand Erosion
At the same time, Chinese demand dropped from 909,000 metric tons in 2013 to 761,000 mt in 2014, despite a 9% increase in output of stainless steel. As a result, the FT quotes Natixis figures saying the market remained in surplus to the tune of 65 kilotons in 2014 a position that is unlikely to change this year. China’s nickel pig iron industry is being closed down in the face of tougher environmental standards. Reuters reports that only around 30% of the country’s capacity is currently operating, although with technological upgrades other producers will reopen given time.
In the meantime, inventories appear adequate as both domestic end user demand appears weak and exports face growing anti-dumping barriers such as the EU’s recent 25% tariff.
A sustained recovery in the nickel price appears highly unlikely this year with no shortage of ore or refined metal available to both NPI plants and stainless steel mills.
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