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As much of the rest of the base metals were lifted this week, nickel remained subdued.
This comes despite an announcement by the Indonesian government that it would relax exports of many minerals but keep in place a ban on nickel ores.
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Several apparently contradictory recent articles have reported the rise in nickel prices following supply disruptions to miners as a result of the spread of the coronavirus.
Reuters reported that just a few weeks ago market surpluses were expected. In a recent poll of analysts, the median nickel market balance forecast for this year was a surplus of 89,000 tons, while Russian producer Norilsk Nickel last week came out with an even heftier surplus estimate of 149,000 tons.
The Stainless Steel Monthly Metals Index (MMI) gave up five points this month, setting the value back to 70.
LME nickel prices dropped slightly below the $13,000/mt price level in late January when industrial metals prices, generally speaking, declined as markets reacted to China’s coronavirus situation.
We observed last month that the peak had passed in nickel prices and earlier suggestions from some quarters that nickel may hit $20,000 per ton were highly unlikely.
Any stainless consumers taking that on board and living hand to mouth will have seen surcharges come down and should have been able to trim stocks in line with falling input prices. Anyone who committed to bulk buys in Q3 will now be sitting on high-price stock as the nickel price — and with it stainless surcharges — continues to ease.
MetalMiner’s Monthly Metal Buying Outlook offers more in-depth advice as to how to react to the nickel price falls and the current market (at least for those who are subscribers).
But the question on many buyers’ minds may be where is it all going from here?
It helps to better understand what has driven the price in recent months.
The LME nickel price has risen 54% since the start of the year, Reuters reported, driven in large part by a perceived supply shock in the form of an accelerated ban on the export of Indonesian nickel ore (a key raw material for Chinese pig iron and stainless-steel makers).
Further support for the nickel price has come in the form of a sustained outflow of refined nickel from LME warehouses, even since September inventory has continued to leave with live warrants down to just 42,000 tons from over 200,000 tons at the start of the year.
The supply-side picture sounds supportive; however, as we wrote last month, the problem is demand.
The market continues to worry about the trade war impacting Chinese manufacturing and, hence, demand, despite the Financial Times reporting this week that Chinese manufacturing expanded at the fastest pace in three years last month. The demand backdrop, though, is one of almost unending doom; reports of high stainless-steel inventory in China are not helping price sentiment.
The risk remains to the downside, which is not what those holders of high-price stock would want to hear. However, for the time being, the nickel price seems to be following the rest of the metals sector: at best sideways and at worst toward further weakness.
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By most accounts, nickel has had a good run this year.
Among a falling commodity market, nickel has been one of only a couple of metals products that have bucked the trend and seen strong gains. Nickel has jumped some 35% this year, largely on the back of supply-side fears.
The Indonesian minister for mines announcement of the country’s intention to ban nickel ore exports from 2020 and falling LME stocks – maybe as a result of those supply fears, maybe in tandem – further stocked fears of tight supply.
Since 2015, LME nickel stocks have fallen from some 500,000 tons to under 100,000 tons today, without any corresponding run-up in trade or off-warrant stocks.
There seems little argument that the nickel market is in deficit.
According to the International Nickel Study Group, the global nickel supply deficit is expected to ease from 144,000 metric tons in 2018 down to 79,000 tons in 2019. The deficit is expected to ease further still, down to 47,000 tons in 2020.
The easing of the deficit comes in large part because demand is slowing.
According to a post on RecyclingInternational.com, stainless steel production in Europe during the first half of 2019 declined 4.9% compared to the first half of 2018, falling to less than 3.75 million tons. The International Stainless Steel Forum also expects total stainless steel consumption in Europe/Africa to fall 5.7% in 2019 before rebounding by a modest 0.4% in 2020.
Yet at the same time, some analysts are predicting Asian demand will grow.
Macquarie Research is quoted as saying it expects Chinese stainless steel production to rise from 26.7 million tons in 2018 to 29.5 million tons in 2019, then 30.1 million tons in 2020.
All other things being equal, that combination should have seen prices continue to rise — or, at the very least, plateau at the elevated levels reached in September. However, after reaching a peak of $18,000 per ton, prices have since fallen back to below $15,000 per ton.
Is this simply a result of investors getting cold feet faced with an ongoing trade war and fears of continued growth in China?
We wrote back in Q3 that nickel prices appeared unsustainable and, as such, we expected them to fall.
But even we didn’t think we would see them back below $15,000 quite so soon.
If it offers any indication of supply-demand, LME nickel inventory has remained fairly stable during the month of November, with deliveries and load-outs reflecting more of trade demand than significant investor behavior.
Suffice it to say, for the time being the plunge in stock levels has stopped.
Producers are making noise about expected demand, particularly from electric vehicles (EVs) – remember them, the source of unsustainable demand for copper, lithium, cobalt and, yes, nickel?
The Union Bank of Switzerland predicts demand from electric vehicles will jump from 3% to 12% of global nickel demand in just three years, not least because states and governments are mandating zero-emission targets for the automotive industry (for example, California may need 1.5 million EVs in the next five years).
Such predictions, if realized, would spur very significant nickel demand.
But we have had false dawns from EVs before.
States can mandate, but they need to put in charging infrastructure and manufacturers need to achieve technological advances that extend between charge ranges before EVs are taken up by the mainstream.
Investors seem to agree the focus remains on the balance between ore and scrap supply on the one side and Chinese, if not Asian, stainless steel production on the other.
Ore and scrap supply seem steady; the knowns are known, at least.
The unknown is demand.
As is so often the case in metals markets, the focus remains very much on China and the health of its manufacturing sector in the year ahead.
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This morning in metals news, an upcoming MetalMiner webinar will explore the challenges manufacturers face in talent acquisition, the nickel price continues to fall after a hot summer and miner BHP released its production results for the quarter ending Sept. 30.
If you haven’t already done so, there’s still time to sign up for MetalMiner’s free Oct. 23 webinar, “The War For Contractor Talent: How Manufacturers Can Find the Workers They Need (and Fast).”
The webinar is free to attend, but registration is required.
MetalMiner Executive Editor Lisa Reisman will be joined by Matt Runfola, founder of the Chicago Industrial Arts and Design Center, and Brett Armstrong, director of business development at Avetta.
It was a hot summer for nickel, which surged from below $12,000 per ton in June to nearly $18,500 per ton in early September, according to MetalMiner IndX data.
However, the nickel price has started to come back down to earth over the last six weeks.
The three-month LME nickel price reached $16,260/mt as of Friday, down 4.07% on a month-over-month basis.
Miner BHP released its quarterly production results for the quarter ending Sept. 30, showing copper production fell 3% from the previous quarter due to planned maintenance.
Meanwhile, metallurgical coal and energy coal production fell 21% and 24%, respectively.
“We delivered a solid start to the 2020 financial year through ongoing strong operational performance across our portfolio,” BHP CEO Andrew Mackenzie said. “While Group production for the quarter decreased slightly due to the expected impacts of planned maintenance and natural field decline in Petroleum, guidance remains unchanged and we are on track to deliver slightly higher volumes than last financial year. The South Flank iron ore project is 50 per cent complete, with all our major projects on schedule and budget. We achieved further encouraging exploration results in Petroleum and at the Oak Dam copper prospect.”
The Stainless Monthly Metals Index (MMI) followed last month’s six-point increase with a 16-point jump this month.
Once again, the index surge came as a result of strong nickel price gains, even though a slim majority of global prices in the index declined (albeit mildly compared to nickel price increases).
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LME nickel prices increased 28.5%, based on supply disruption news. Nickel prices in China and India also reacted strongly, increasing by 25.9% and 24.1%, respectively.
Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets
Source: MetalMiner analysis of FastMarkets
The Indonesia nickel ore export ban will now take effect two years earlier than planned, on Jan. 1, 2020. SHFE prices surged just prior to, and during the day or so around, the actual approval of the ban date by the Indonesian government.
Opinions appear mixed as to whether prices will drop back down anytime soon, with some analysts foreseeing further price increases.
Indonesia produced around 26% of global mine supply last year, according to the International Nickel Study Group.
It is possible ramped-up production of nickel pig iron in Indonesia will stave off further price increases from supply shortages. According to Reuters, large mining companies reportedly welcomed the ban and plan to increase smelting output.
Also, higher ingot prices higher, incentivizes mine production; as such, increases could also come from other sources.
According to a recent Reuters report, Dante Bravo, president of the Philippine Nickel Industry Association indicated mine production looks set to ramp up in 2020, but constraints, such as government-imposed mining curbs, will limit growth. Bravo added mining volume most likely peaked with 2014’s record-setting high of 50 million tons.
The Philippines produced 11.31 million tons of nickel during the first half of 2019, up by 3% compared with the first half of 2018, Reuters reported.
Source: MetalMiner data from MetalMiner IndX(™)
Stainless 304 and 316 NAS surcharges increased in August due to sizable nickel price increases. Next month’s MMI looks set to show a greater impact from surcharges than they showed in August.
MetalMiner’s stainless steel price index hit near a five-year high, rising to a value not seen since November 2014’s value of 92. As indicated last month, prices appear speculatively high; premium prices also surged.
Therefore, industrial buyers need to stay alert for the right opportunity to buy.
Buying organizations interested in tracking industrial metals prices with greater ease will want to request a demo of the MetalMiner Insights platform.
Buying organizations seeking more insight into longer-term steel price trends should read MetalMiner’s Annual Metal Buying Outlook.
Once again, nickel prices registered double-digit increases for the monthly index reading.
The LME primary three-month nickel price increased by 28.5% to $18,475/mt. China’s primary nickel price increased by 25.9% to $20,601/mt. India’s primary nickel price increased by 24.1% to $17.99/kilogram.
The U.S. 316 and 304 Allegheny Ludlum stainless surcharges increased by 14.1% and 16.6%, respectively, to $1.00/pound and $0.69/pound.
More than half of the prices in the index dropped, albeit mildly compared with the price increases.
Chinese Ferro Alloys FeMo lumps dropped by 4.7% this month, while FeCr lumps dropped by 4%.
Chinese 316 and 304 stainless steel scrap prices both dropped 4%, down to $1,827/mt and $1,401/mt, respectively.
Chinese 304 CR stainless steel coil increased 4.4% to $2,259/mt, while 316 CR coil dropped by 0.8% to $3,081/mt.
Korean prices for 430 CR 2B stainless steel coil and 304 CR 2B stainless coil both decreased by 2.2%, down to $1,195/mt and $2,101/mt, respectively.
On the heels of the doldrums of December, metals prices have made gains through the first two months in 2019.
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February was an especially strong month for a number of metals.
However, markets are especially sensitive to any snippets of news coming out of the ongoing U.S.-China trade talks. President Donald Trump recently delayed the March 1 deadline for a planned tariff rate increase as talks continued.
Whether the two countries reach a meaningful deal anytime soon remains to be seen; as of now, however, metals prices are enjoying a bit of upward momentum.
With the January 2019 Monthly Metals Index (MMI) report, we can close the book on 2018 and what was a wild year in the world of metals and metals price movements.
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It was a book that closed with a pessimistic chapter for metals (and commodities in general), with many posting price declines as markets feel the effect of simmering trade tensions between the U.S. and China.
In our latest MMI report, you can read about all of the latest news and trends in our 10 metals subindexes: Automotive, Construction, Rare Earths, Renewables, Aluminum, Copper, Stainless Steel, Raw Steels, GOES and Global Precious.
A few highlights from this month’s round of reports:
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Read about all of the above and much more by downloading the January 2019 MMI Report below:
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This morning in metals news, the nickel price has plunged to its lowest level in 11 months, Canadian Prime Minister Justin Trudeau spoke with President Donald Trump over the weekend regarding the U.S.’s steel and aluminum tariffs, and two train derailments appear to have had little impact on Australia’s iron ore sector.
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The nickel price dropped to an 11-month low Monday, Reuters reported, based on worries of slowing Chinese steel demand.
LME nickel fell 1%, while the most-traded Shanghai nickel contract fell 2.4%, according to the report.
MetalMiner’s Take: While nickel falls to an 11-month low, the MetalMiner analyst team has a close eye on several key metals market price drivers.
Oil prices have begun to drop but remain above the $58/barrel level, which serves as the long-term bear/bull threshold. As oil prices currently remain above that level, the long-term trend remains bullish.
The other key price driver to watch is the U.S. dollar, which has increased. However, it remains below the key resistance level MetalMiner has set as the level at which the markets turn from bullish to bearish.
MetalMiner readers will note the dollar and commodities trade inversely, so a higher dollar results in lower commodity prices.
Metal-buying organizations will want to pay careful attention now to oil prices, the U.S. dollar and China demand. A change in any two of these three could signal a market shift.
As world leaders gathered in France this weekend for the 100th anniversary of Armistice Day, Canadian Prime Minister Justin Trudeau and President Donald Trump exchanged words over the weekend regarding the U.S.’s steel and aluminum tariffs, Reuters reported.
Canada’s temporary exemption to the U.S.’s Section 232 steel and aluminum tariffs expired June 1.
According to the report, Trudeau said he hoped to reach a resolution on the issue before this year’s G20 Summit, which kicks off Nov. 30 in Buenos Aires.
A pair of recent train derailments have had minimal impact on Australia’s substantial iron ore sector, according to a Bloomberg report.
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According to the report, iron ore futures on the Dalian Commodity Exchange fell 1% Monday.