Stainless MMI: Surcharges rise for third straight month

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stainless steel

Maksym Yemelyanov/Adobe Stock

The Stainless Monthly Metals Index (MMI) increased by 4.4% for this month’s MMI value.

August 2020 Stainless MMI chart

Surcharges increase for a third month

While stainless demand continues to remain in line with U.S. flat-rolled producer supply, alloy surcharges are rising for the third month in a row.

Why? The surcharge increases are again due to an increase in the nickel price.

Over the past month, the LME nickel price increased over 6% to $14,433/mt as of Aug. 6.

Similarly, the Chinese nickel price increased to $16,515/mt (or CNY 113,850/mt).

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

Nickel price jumps over supply fears

The Mines and Geosciences Bureau reported that Philippines nickel exports declined by 28% year on year to 102,310 tons during the first half of the year.

The export decline made waves on the LME and SHFE, where the nickel price increased.

Top producers reassured the market that no further disruptions are anticipated for the remainder of the year, despite coronavirus cases having increased since the first half of the year.

Moreover, the largest exporter of high-grade nickel, SR Languyan Mining Corp, will likely deplete by the end of this year, according to the Ministry of Environment and Natural Resources of the region. This would mean the Philippines may fail to keep up with their current exports to China, further supporting the nickel price.

Demand in China has remained high. Macquarie analyst Jim Lennon estimated Chinese mills produced 2.88 million tons of stainless steel in July, or a 4.8% year-over-year increase. High-nickel containing 300-series grades of stainless grew 17.5% year over year to 1.46 million tons in July (an all-time high).

However, Lennon still expects a nickel ore surplus of around 100,000 tons for 2020.

Some demand recovery in the U.S.

The Association For Manufacturing Technology (AMT) reported U.S. manufacturing technology orders in June increased to $346.7 million, 56% more than the previous month. June orders, however, increased just 6% from June 2019.

Orders from January to June totaled $1.69 billion in 2020, down 26% year over year.

According to the AMT, manufacturing technology encompasses metal cutting, forming and fabricating. One of the industries that saw the largest order increase was the automotive sector, which almost doubled orders from June 2019. Meanwhile, agricultural equipment manufacturers nearly quadrupled and manufacturers of HVAC and commercial refrigeration equipment more than tripled orders for manufacturing technology.

The AMT expected a similar amount of orders for the month of July as demand bounces back.

Actual metals prices and trends

The Allegheny Ludlum 316 stainless surcharge declined 1.6% month over month to $0.79/pound. The 304 surcharge rose 0.8% to $0.61/pound.

LME primary three-month nickel rose 7.5% to $13,806/mt.

Chinese 316 and 304 cold-rolled coil rose to $2,923.63/mt and $2,106.74/mt, respectively.

Chinese primary nickel rose 8.0% to $15,592.71/mt. Indian primary nickel rose 7.4% to $13.85/kilogram.

FeCr lumps increased 1.3% to $1,490.48/mt.

Make sure you are following the five best practices of sourcing stainless steel

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