Stainless MMI: Index down as weak demand impacts global prices

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Maksym Yemelyanov/Adobe Stock

The Stainless Steel Monthly Metals Index (MMI) declined by three points this month to 67, following a five-point decline last month.

LME nickel prices continued to slide as global markets reacted to production delays due to coronavirus, which weakened demand and prices.

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

Prices continued to trade near to $13,000/mt recently but are now trading below this price point.

Prices just managed to hold onto a long-term uptrend at this time, as pointed out in the March MetalMiner Monthly Outlook report.

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SHFE nickel prices weaken as Chinese demand stalls

SHFE prices took another dip this month, then recovered back above CNY 100,000/mt and regained momentum off of recent support levels.

Source: MetalMiner analysis of FastMarkets

However, with three sequentially lower bottoms indicating short-term weakness likely remains, it will be interesting to see if SHFE nickel prices — as well as LME nickel prices — can maintain a longer-term uptrend during the upcoming weeks.

Global demand increased mildly in 2019

According to Outokumpu’s 2019 annual report, global apparent consumption increased by 2.7% last year. A second measure tracked by the company, global real demand, increased 1.5% to 43.8 million tons in 2019.

Outokumpu’s architecture, building, construction and infrastructure segment saw a demand increase of 5%, the consumer goods and medical segment grew 3%, and heavy industry demand grew by 1%.

Demand appeared flat for the chemical, petrochemical and energy segment. Demand in the automotive and heavy transport segment contracted 7%.

The company shipped 55% of its output to end-users and 45% to intermediaries.

Outokumpu reported global stainless steel capacity of slabs totaled around 58.8 million tons in 2019, with around 72% of that capacity in use (a slight decrease compared to 2018).

Actual slab production grew globally by around 1% in 2019 to 42.6 million tons.

While production declined in most regions, including Europe and the Americas, production grew in China and Indonesia by by 9% and 15%, respectively, compared to 2018.

U.S. stainless steel tariff conflict over Allegheny-Tsingshan-Midland imports

In an open letter to the U.S. Department of Commerce in early February, Sen. Pat Toomey spoke out publicly on behalf of Allegheny Technologies Inc.’s efforts to gain relief from Section 232 tariffs on stainless steel imports.

The imports of stainless in question come from joint venture partner Tsingshan Holding Group Co. of China, which also has production facilities for crude stainless steel production in Indonesia.

Rather than providing tariff exceptions, other stainless producers, such as Outokumpu and North American Stainless, support the Section 232 tariff measures. They argue that such imports threaten the future existence of effectively any U.S. capacity.

Additionally, they seek the removal of Indonesia’s tariff-free access to the U.S. market under a special developing nation program, according to press reports.

Following commencement of operations in Indonesia in 2016, Tsingshan has come under global scrutiny for alleged stainless steel dumping in multiple countries. This includes dumping complaints from its home country, China, during 2019.

In a March 1 editorial by local UAW President Jim Panei of AK Steel, he argues for the tariffs, contending AK Steel has the capability to meet Allegheny’s needs. However, he contends this capacity is now under threat of closure due to a Section 232 tariff loophole.

Indonesia to introduce measures aimed at maintaining fair nickel price floor

Indonesia’s Energy and Mineral Resources Ministry plans to introduce measures related to maintaining a nickel ore price floor.

The measures are aimed as a means of implementing fair business practices in a post-ban environment, according to news reports from Jakarta.

Domestic stainless steel market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges dropped again recently after a slight increase last month.

In early March, surcharges for NAS 304 dropped to $0.57/pound and NAS 316 dropped to $0.83/pound.

What this means for industrial buyers

With global demand still looking weak, price weakness may continue for now.

However, with the technical uptrend still in place, industrial buying organizations will need to watch the market carefully for the return of a stronger uptrend.

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Actual stainless steel prices and trends

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges dropped this month, reversing mild gains from last month, by 4% and 7.8% respectively, to $0.84/pound and $0.59/pound.

FeMo lumps from China dropped by 7.3% to $14,303/mt, the largest Chinese price decrease seen for February, while FeCr lumps declined by 1.1% to $1,516/mt.

China’s primary nickel price also dropped by 3.6%, as did India’s, to $14,418/mt and $12.8/kilogram, respectively.

LME nickel prices dropped 4% to $12,250/mt.

[Track LME, Chinese, and Indian nickel prices daily through the new MetalMiner Insights platform, which features unlimited entity usage. Request a demo now.]

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