The monthly Stainless MMI® registered a value of 59 in October, flat from last month.
Most base metal prices stabilized this month and nickel was exception. The metal is finding support just above its 2008 lows. Nickel is the metal closest to its recession level. This level could act as a psychological support level for traders, helping support prices in the coming months. However, we suspect this won’t be enough to hold prices longer-term if bad news keeps coming out of China.
China is still producing more than it can absorb. Weak Chinese demand and the fear that the worst has yet to come remains the overriding theme for nickel. Price-related closures in the nickel industry have been frequent over the past few months. However, as we’ve been pointing out, it’s hard to determine how many more mine closures we will need to see before prices find that elusive floor.
Besides weak demand, investors remain worried about the high level of visible inventories. Not that inventory levels are a good price indicator but, for what it’s worth, inventories today are way higher than what they were when nickel bottomed out after the recession. Today’s LME nickel inventory levels appear closer to 450,000 metric tons, still near their all-time high of last June, while in 2008 nickel stocks fell below 60,000 mt.
The inventory picture looks similar in the stainless market. Domestic and import mill inventories remain high, with domestic mill lead times remaining short. With inventory well-stocked and the end of the year approaching, service centers will keep trying to reduce inventories, hesitant to order more than what’s absolutely necessary.
What This Means For Metal Buyers
We’ll have to wait and see if prices are able to bounce off their record lows. So far, we only see a lack of upside momentum. Nickel prices might need more than that before making a significant rally.
The Allegheny Ludlum 316 stainless surcharge fell 10.5% to $0.53 per pound. The price of Chinese primary nickel rose 0.4% over the month to $11,905 per metric ton. After rising 2.4%, the 3M nickel price finished the month on the LME at $10,105 per metric ton. Chinese 304 stainless steel scrap closed the month at $1,187 per metric ton after dropping 0.9%.
Last month was consistent for Chinese ferro-chrome, which only rose 0.4% to $1,706 per metric ton. Chinese ferro-moly slightly also increased by 0.4%, finishing at a price of $9,122 per metric ton,