Stainless MMI: LME nickel prices contradict market fundamentals

by on
stainless steel

Maksym Yemelyanov/Adobe Stock

The Stainless Monthly Metals Index (MMI) increased by 3% this month after holding flat for two consecutive months.

Surcharges increase along with nickel prices

U.S. stainless steel alloy surcharges rose for the second month in a row due to the increase in nickel prices.

Are rising surcharges causing concern? Make sure your base prices are held fixed. See how service centers negotiate with you.

Over the past month, LME nickel prices have increased 7.9% to $13, 567/mt by July 14. The Chinese nickel price has seen the same growth percentage, rising to $15,421/mt (or CNY 107,950/mt).

Nickel sees high supply, low demand

Despite concerns over a nickel shortage in the near future due to Indonesia’s nickel ore export ban back in January, the nickel market remains in surplus.

International Nickel Study Group (INSG) data showed the nickel market surplus for the first four months of the year was 53,900 metric tons compared to a deficit of 23,500 metric tons in the same period of 2019.

Jim Lennon at Macquarie shared a similar outlook. He pointed out the nickel surplus shows in the ferro-nickel and NPI discounts against the LME price.

“Ferro-nickel is at a $1,500 a tonne discount, and NPI is trading at a discount of more $500 a tonne when normally you would see it trade at a premium,” Lennon said. “These discounts are unprecedented.”

He anticipates a total surplus of 115,00 metric tons for 2020 — or approximately 5% of the global nickel supply — with nickel demand contracting by 5-6% this year.

Furthermore, Antaike reported China’s nickel cathode output in June rose 10.8% year over year to 15,099 metric tons. The Chinese nickel cathode supply has not been altered by the shutdowns and changes are not expected for the remainder of the year.

As such, why is the price going up if demand has fallen and the market appears oversupplied?

Traders likely remain concerned about potential nickel supply shortages and they expect governments to accelerate their investments in green energy as a form of stimulating their economies.

How could upcoming elections impact the steel market?

As of today, several polls indicate Democratic candidate Joe Biden might win the general election against President Donald Trump in November. This has raised some concerns in the steel market, as it assumes Biden will eliminate Section 232 steel tariffs that came into effect June 1, 2018.

Even though Section 232 seemingly supported U.S. steel prices for six months after it came into effect, the tariff removal may have a negative impact on prices as the market remains oversupplied. Others, however, feel Biden may take a page out of Trump’s economic plan and not eliminate the Section 232 tariffs.

In addition, Biden’s plan to raise corporate tax rates from 21% to 28% would negatively impact investment and consumption.

However, a potential Democratic House and Senate could accelerate infrastructure spending bills, a potential positive tailwind for steel and stainless demand.

Are you on the hook for communicating the company’s stainless steel performance to the executive team? See what should be in that report!

Actual metals prices and trends

The Allegheny Ludlum 316 stainless surcharge rose 2.0% month over month to $0.80/pound. The 304 surcharge rose 3.9% to $0.61/pound.

LME primary three-month nickel rose 5.3% to $12,837/mt.

Chinese 316 and 304 cold-rolled coil rose to $2,893.49/mt and $2,023.32/mt, respectively.

Chinese primary nickel rose 0.6% to $14,439.17/mt. Indian primary nickel rose 2.1% to $12.89/kilogram.

FeCr lumps fell 1.0% to $1,471.51/mt.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.