Nickel has fallen to a 6-year low on the London Metal Exchange. Prices have failed to find support at a key level.
The monthly Stainless MMI® registered a value of 72 in April, a decrease of 7.7% from 78 in March. Stainless steel prices are falling along with their key alloying metal.
What Do We Mean by Key support Levels?
It’s Pretty simple. “Support,” in this usage, is a price level where demand (buying power) is strong enough to prevent the price from declining further. During 2013-2014 nickel prices found support several times at $13,300 per metric ton, as traders found that level to be a good entry point to buy the metal. Last week, prices fell as low as $12,310 per mt.
Those traders that supported the metal price from declining further have now changed their minds. This simply means that the market sentiment has changed. Selling pressure has overcome buying power and, without making any predictions, nickel is now more vulnerable to further declines.
Two factors helped to change the market sentiment:
- The expected deficit that Indonesia’s export ban would create has failed that to materialize. Indonesian supply was replaced by increased supply from the Philippines, up 23% in 2014 from a year before. Moreover, as my colleague Stuart Burns pointed out, Chinese demand dropped from 909,000 mt in 2013 to 761,000 mt in 2014, despite a 9% increase in output of stainless steel.
- A bearish commodity environment, a strong dollar and low oil prices are punishing nickel prices. Not just nickel but by looking at the performance of other base metals, it was clear that a bear looms.
What This Means For Metal Buyers
Neither the technical nor the fundamental story looks promising. A sustained recovery in the nickel price appears quite unlikely until we see a significant turnaround of the supply story.
On the LME, the spot price of nickel fell 11.3% over the past month to $12,455 per metric ton. On the LME, the nickel 3-month price fell 11.1% to $12,525 per metric ton. The price of Chinese primary nickel declined 8.0% over the month to $15,638 per metric ton. A 5.7% drop left the Allegheny Ludlum 316 stainless surcharge at $0.82 per pound. Last month, Chinese ferro-moly prices dropped by 2.4% to $12,897 per metric ton. Chinese 304 stainless steel scrap prices fell 2.1% to $1,491 per metric ton after rising the previous month. After rising the previous month, Chinese 316 stainless steel scrap prices dropped 0.8% to $2,088 per metric ton.
Chinese ferro-chrome held pat last month at $1,765 per metric ton. Last month was consistent for Chinese 304 stainless coil, which did not move from $2,692 per metric ton. Hovering around $3,821 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.