Last month we discussed the stainless steel inventory overhang at length. That story continues, as both nickel inventories jumped to a record high and service center inventory levels of stainless steels remain high, despite decent end-user demand.
Often not discussed? The subject of inventory devaluation. With nickel prices remaining weak, service centers remain hesitant to replenish stocks.
Domestic stainless mills continue to be challenged to maintain base prices in a market flush with inventory. As pressure mounts to maintain sales, the domestic stainless mills continue to be pitted against each other for volume orders. The mills will not move on price unless they have an order in hand for volume.
The producer outlook for nickel-based stainless prices also remains flat – otherwise mills would push for forward orders. Because stainless mills have filled their capacities by producing for stock without a solid base of service center production orders, the domestic mill inventories remain robustly stocked as well.
And as MetalMiner previously reported, the nickel surplus continues and will likely run through Q2, especially as China’s stainless steel mills go into maintenance this month.
Nickel Price Forecast: Top 5 Things to Watch
- Dollar to Euro exchange rate
- Stainless steel global production
- Global capacity utilization
- China coking coal prices (impacting Chinese nickel pig iron production)
- China GDP & PMI data
Nickel remains in an oversupplied condition and prices seem unable to breach short-term resistance levels while the rest of the industrial metals remain in bearish mode. Three-month nickel closed the month of May at $12,600 per metric ton, down 10% from April. The recent strength of the dollar could keep nickel in its downtrend and therefore we see more price risk to the downside.
What’s the short-term industrial buying strategy?
This nickel/stainless market outlook has been excerpted from our latest and greatest product. For a buying strategy and exact price thresholds to follow, check out June’s complete Monthly Market Outlook report to get the full monty.