Stainless Steel MMI: Index Moves Up For First Time Since March

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The Stainless Steel MMI inched one point higher to 55 for our July reading, finding itself at the same level as the July 2016 reading.

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This is the first increase for this sub-index since March 2017, when the Stainless Steel MMI reached 63 points after a four-point increase.

Surcharges in the U.S. mill surcharges have decreased sharply this month. Reductions have been recorded on a month-to-month basis, resulting in a 17.8% reduction for ATI’s 316 surcharge and 19.9% for their 304. MetalBulletin also reports a reduction in the alloy surcharges in Europe. Deliveries of grade-304 cold rolled stainless steel sheet have fallen by €52-62 ($58-69) per ton month-on-month.

Global prices of ferrochrome, one of the raw materials used to make stainless steel, has dropped to lowest levels this year. This reduction is caused by weaker demand from stainless steel mills in China, currently the top producer of stainless steel, as reported by Reuters. Two of the largest stainless producers in China (Taiyuan Stainless and Tsingshan Group) blame weaker demand on increased stocks of ferrochrome in Chinese ports.  

The U.S. manufacturing PMI fell to 52.1 in June from 52.7 in May. This indicator has fallen below market expectations of 53, revealing a slowdown in business growth. Manufacturing PMI is at its lowest value since September 2016.

Chinese economic indicators, meanwhile, point to a moderation in Chinese growth.

China’s GDP is also expected to fall 0.1% this quarter. The Caixin Manufacturing PMI in China has increased this month to 51.70 points, 2.1 points above its previous value. This growth has beaten the market expectations of 49.5, caused by the faster rate of exports and output in the Chinese manufacturing industry.

The Section 232 investigations for both aluminum and steel (including stainless steel) have created additional price uncertainty. Europe is now beginning to express its concerns about the possible outcome of the investigations. A report on the investigations is due by January 2018, though there is speculation that Commerce Secretary Wilbur Ross will release his recommendations in July.

Nickel prices have also shown weakness this month, reaching an 11-month low of $8,680/metric ton. Recently, nickel saw a stabilization in its supply. The export ban has eased in Indonesia, allowing the country to maintain its position as the world’s largest nickel producer.

What This Means for Industrial Buyers

The boost in stainless steel prices that comes from China counters the reduction of stainless steel surcharges this month. Political and macroeconomic indicators should also be watched closely.  

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Actual Stainless Steel Prices, Trends

Stainless steel slightly increased during this month of June, except the Chinese 304 stainless steel cold-rolled coil fell by 1.7% to $2,019.26/mt. The sharp drop in stainless steel surcharges counters the 5.36% increase of LME nickel, which closed June at $9,325/mt up from its 8-month low.

China primary nickel increased to $11,223.87/mt, 4.8% higher than the previous closing price.

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