Stainless price rises offer a hint of support for nickel

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Maksym Yemelyanov/Adobe Stock

Nickel prices have seen support in recent months more from supply-side concerns.

Initially, support came from bringing forward of Indonesia’s raw material export ban. More recently, support came from concerns the coronavirus pandemic would shut down mines in the Philippines and Indonesia, in addition to disruption of shipping to top consumer China.

But a recent Reuters article reports prices for stainless steel have risen in China due to strong demand as the economy gets back on its feet after lockdown.

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Exports are still weak, but demand across the domestic economy is increasing and prompted the most-traded stainless steel futures contract on the Shanghai Futures Exchange, for June delivery, to rise as much as 4.4% before ending the session 4.0% higher at 13,675 yuan ($1,931.55) a ton — a nine-month high, the highest since Aug. 1.

Supply fears have not evaporated. However, the top two nickel miners in the Philippines have gradually resumed mining and shipping operations since May after coronavirus-led disruptions put all activity on hold, suggesting supply-side issues should fade now despite output currently still being lower than it was this time last year.

Stainless steel price rises are against a backdrop of flat or sidewise prices for common steel products and steelmaking input costs. Iron ore and coking coal were respectively slightly up and slightly down last week, suggesting little dynamics in the market for raw materials.

Finished steel prices have likewise moved little with Baoshan Iron & Steel Co Ltd reportedly raising hot-rolled coil prices for June delivery by a meager 50 yuan per ton and keeping cold-rolled products unchanged.

Nickel prices outside of China have not responded to the improvement in stainless prices inside the country yet and nor will they in the coming days, as a wider recovery is probably needed or a sharp rundown in inventory.

But if stainless continues to show strengthening demand, the SHFE nickel price will likewise rise and simple arbitrage will see a firming in LME prices.

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It is too early to say if recent rises in stainless prices is the start of an upward trend for nickel, but as a precursor to global nickel price rises, buyers could do worse than keep an eye on the SHFE stainless prices for continued strength in coming weeks.

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