Nickel, the main price driver of stainless steel, scored gains of 11% during the month of July causing our stainless MMI to surge by 9%.
Industrial metals entered bull market territory earlier this year and that puts the wind behind nickel’s back. Apart from the more bullish macro environment, we are witnessing two key developments within nickel’s industry that are undoubtedly adding fuel to this rally.
Tighter Environmental Rules
The Philippines isn’t joking around about tightening its environmental rules. On the first of the month, the Philippines new President, Rodrigo Duterte, used some bold words against his country’s miners: “We will survive as a nation without you. Either you follow strictly government standards or you close down.”
The country has so far suspended the operations of seven domestic nickel mines for failure to comply with environmental regulations. Moreover, the new mining minister, Regina Lopez — a committed environmentalist — recently vowed to close more nickel mines causing environmental destruction.
The Philippines is the biggest supplier of nickel ore to top consumer China since Indonesia banned shipments of unprocessed mineral ores back in 2014. The recent suspension of mines and the risk of more closures lifted nickel prices over the past few weeks.
Surge in Nickel Imports
Although the metal has benefited for the most part from a bull narrative of supply shortfall this year. The bulls are finding more reasons to bet on nickel amid growth in Chinese demand, which is being reflected in the surge in Chinese imports this year. Refined nickel imports in China have surged by 189% to a record 226,100 metric tons in the first half of the year.
What This Means For Metal Buyers
The Philippines is the top supplier of nickel ore to China and these new developments have sparked concerns about ore supply. Moreover, demand seems solid thanks to China’s stimulus measures. These two factors, combined with a bull sentiment across the industrial metals complex, have given buyers enough reason to take risk off the table as prices could continue to trend up.
Exact Stainless MMI and Nickel Prices, Trends
The Allegheny Ludlum 316 stainless surcharge rose 7% to $0.54 per pound while the 304 stainless surcharges surged 13% to $0.4 per pound. The price of Chinese primary nickel rose 10% over the month to $12,177 per metric ton. The three-month nickel price on the LME jumped 11% to $10,485 per metric ton. Chinese 304 stainless coil ended flat at $2514 per metric ton.