Stainless MMI: Index Falls One Point as LME Nickel Moves Sideways, SHFE Nickel Drops Slightly

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Source: Maksym Yemelyanov

The Stainless Steel Monthly Metals Index (MMI) dropped again this month, by one point to 87.

The drop follows last month’s three-point decline to 88 on the heels of August’s five-year high of 91.

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LME nickel prices continued to move sideways overall, while slowly dropping from price surges that hit the metal recently due to future supply concerns.

Since hitting a peak closing price of $18,100 in early September, prices dropped by around 10% during the past two months.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Based on a longer-term look at price data, prices exceed an eight-year average price of $13,572/mt (corresponding to the graph’s timeline) which is represented by the blue line:

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Trading volumes tapered off during recent weeks, indicating sideways movement could continue.

Prices still remain high compared to the longer-term average; therefore, prices could also continue to drift lower, although some analysts expect prices to remain high.

In fact, over the long term, prices keep rising, with price bottoms progressively rising since 2016.

SHFE Nickel Prices Drop Slightly from September High Prices

Like LME prices, SHFE nickel prices remained higher but drifted back down from recent high prices.

Source: MetalMiner analysis of FastMarkets

Since hitting a peak high of CNY 146,850/mt in early September, SHFE nickel prices dropped back by around 11% over the course of roughly two months.

The SHFE nickel price dropped to CNY 130,320/mt in early November.

Global Supply Chains React to High Nickel Prices

China’s Jinchuan Group recently commented that its mine in Qinghai would help supply the company this year. Therefore, the export ban on Indonesian mined nickel will not impact the company’s operations significantly, according to Reuters.

The company’s joint venture laterite project in Indonesia ramped up this year, with the first ferronickel output in sight. However, an official launch date for the project, which is expected to have an annual capacity of 10,000 tons, has not yet been announced.

Mining output from the Philippines looks set to pick up, helped by higher prices. Higher prices make compliance more affordable as the country seeks to transition away from open pit mining. The government continues to regulate the industry stringently, constraining expectations of large output gains.

Forecasts call for modest growth in output, by around 2.5% per year annually through 2028, as reported by Reuters.

Tsingshan Holding Group Co., a top Chinese stainless steel producer, faced scrutiny recently for making large purchases of nickel from LME warehouses.

Chinese stainless competitors accused the company of manipulating the market, while the company could have made the advanced purchases to shore up future stocks ahead of the 2020 Indonesian export ban.

At any rate, large rounds of nickel purchases by the company appeared to impact prices; the situation is under examination by the LME.

China’s Stainless Sector Expected to See the Biggest Impact of 2020 Nickel Shortage

Given that most nickel ends up in stainless steel production, and since the majority of stainless steel gets produced in China, stainless steel production will be a key area impacted by a nickel shortage. The uptick in production in the Philippines is not expected to fully compensate for a drop in Indonesian supply.

According to data from the International Stainless Steel Forum (ISSF), stainless crude output increased in H1 2019 by 1.9% compared to H1 2018. That increase came entirely from China, with an 8.5% production expansion to 14.4 million tons for the first half of the year.

China’s gains offset output declines reported in all other global regions, which fell in the range of 3.4% to 6.4%.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges stayed higher recently after rising during the past few months due to nickel price increases.

However, 316 surcharges dropped back slightly to $1.06/pound in November (compared to $1.08/pound during October). Surcharges for 304 held at $0.74/pound.

What This Means for Industrial Buyers

Nickel prices remained higher this month; therefore, industrial buying organizations need to stay alert for the right opportunity to purchase.

Buying organizations interested in tracking industrial metals prices with greater ease will want to request a demo of the all-new MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term industrial metals price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

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Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Actual Stainless Steel Prices and Trends

The LME primary three-month nickel price dropped only mildly this month — following last month’s 6.8% correction — by 2.4% to $16,800/mt.

India’s primary nickel price dropped by 4.5% to $16.90/kilogram.

China’s primary nickel price increased by 1% to $19,356/mt. Other Chinese prices in the index generally increased in the range of 1.6% to 2.8%, with the exception of FeMo lumps, which dropped by 12.9% this month to $16,201/mt, and FeCr lumps, which increased 6.6% to $1,649/mt.

Indexed Korean prices increased 2.8% with stainless steel coil 430 CR 2B and 304 CR 2B at $1,539/mt and $2,480/mt, respectively.

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges fell slightly — by 1.4% and 0.8%, respectively — to $1.10/pound and $0.77/pound.

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