Stainless MMI: Significant nickel price correction leads to a thirteen-point drop

The Stainless Steel Monthly Metals Index (MMI) dropped again this month, by thirteen points to 74, the third and largest consecutive monthly drop, with nickel prices correcting significantly.
Stainless Chart December 2019 FNL
LME nickel prices finally corrected, now back to levels last seen in late July. While prices held on to higher levels for a few months based on supply concerns, sluggish demand ultimately trumped supply concerns during Q4.
Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets
Prices have now dropped below the average year-to-date value of $13,960/mt.
Later in the month, price declines stalled out around the $14,500/mt level before continuing to plunge toward long-term support levels.
Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets
Based on nickel’s uptrend since 2016, prices may soon begin to find support once more, rather than continuing to fall.

SHFE nickel prices drop back significantly

SHFE nickel prices also showed significant corrections this month, dropping by nearly 20% during November. Values now look back in line with prices from earlier in 2019.
Source: MetalMiner analysis of FastMarkets
Based on a longer-term look at the price trend, like LME nickel prices, SHFE nickel prices look close to finding support once more. Therefore, from a technical perspective, we can anticipate the price to strengthen once more as we move into 2020.
If prices cannot hold at long-term support, this will be due to poor demand, which could indicate sustained bear market conditions during Q1 2020.

China’s property sector may be the key to where prices head in Q1 2020

Long-term expansionary monetary policy fueled real estate growth in China, as explained in this recent article by MetalMiner’s Stuart Burns.
Beginning in 2017, the Chinese government began putting measures in place to reduce speculative investments in real estate, toward preventing future bubble markets.
In spite of these efforts — and due to extended negative real interest rates continuing to drive strong demand for real estate investments — real estate market prices continue to appear inflated.
As such, China looks susceptible to a real estate market downturn that could send nickel prices below long-term support levels.
Based on the most recent data available from the International Stainless Steel Forum, during 2019, only China saw sustained stainless steel demand growth, while demand contracted in the rest of the world. However, growth in stainless output outpaced demand growth in that country, according to recent press reports.
Excess stainless steel stocks built up as a result, reflected in weaker stainless prices recently, as represented by falling SHFE stainless steel futures prices.

Vale to divest New Caledonian nickel mine assets

Vale announced plans to divest its New Caledonian operations due to technical difficulties, according to press reports. However, the company plans to boost mining operations in Indonesia.
The company plans to boost Indonesian mine production by 70% into the foreseeable future with joint venture partners. Expansion will target ramped up output of 360,000 tons per year, with no deadline to hit the target given.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)
Stainless 304 and 316 NAS surcharges dropped this month, following from recent corrections to nickel prices. Surcharges for 304 dropped to $0.68/pound, similar to the September rate of $0.66/pound. NAS 316 surcharges dropped back to $0.94/pound for December, comparable to September’s rate of $0.97/pound.
Both surcharges will likely see further corrections back to August levels at a minimum, which were at $0.57/pound and $0.86/pound, respectively.

What This Means for Industrial Buyers

Nickel prices retraced significantly once again, with the retracement progressing at full steam during November. While prices look close to stabilizing, further price weakness cannot be ruled out as 2020 arrives.
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.
Download your free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook now.

Actual Stainless Steel Prices and Trends

The LME primary 3-month nickel price finally showed a significant correction following the speculative price increase a few months back, losing 17% this month, based on a value of $13,915/mt, compared to $16,800/mt in October.
Primary nickel prices in China and India showed similar price corrections – of 18% and 17% respectively. China’s nickel price dropped to $15,890/mt compared to $19,356/mt last month, while India’s price dropped to $14.0/kilogram compared to $16.9/kilogram last month.
Other Chinese prices in the index generally dropped. FeMo lumps dropped by 6.1% this month to $15,215/mt, and FeCr lumps dropped 10.3% to $1,479/mt. Stainless steel scrap prices held flat.
The U.S. 316 and 304 Allegheny Ludlum stainless surcharges fell by 11.1% and 7.1% respectively, to $0.97/pound and $0.72/pound.
Indexed Korean prices dropped 1% with stainless steel coil 430 CR 2B and 304 CR 2B at $1,523/mt and $2,454/mt, respectively.

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