Stainless steel producers have been caught in a pincer movement over the last year of rising nickel prices but falling demand.
It is a counterintuitive situation until you factor in China’s stainless production. Chinese output rose by 4% in the third quarter of last year compared to the rest of the world, which fell by 9%. The disconnect between China and the rest of the world is driving a complex dynamic in the nickel market.
The result is rising LME inventory of refined metal while, at the same time, prices are pushing close to 17-month highs at $18,675 per metric ton, Reuters reported.
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China’s history of nickel imports
Historically, when China’s stainless producers are running hot they suck in refined nickel imports (much as they have done over the last year on aluminium and copper).
But in nickel’s case, the imports are booming for raw materials, nickel pig iron (NPI) and ferro nickel (FeNi), due in large part to Indonesia’s export ban on ores and the resulting investment made in NPI production in Indonesia by Chinese producers.
China’s imports of NPI and FeNi have boomed. Imports totaled 3.4 million tons in 2020, up 80% from 2019. Indonesia made up the lion’s share of those imports. China imported 600,000 tons from the country in 2018 and 2.7 million tons in 2020.
Ores and concentrates, by comparison, have fallen with the Philippines and New Caledonia unable to make up the shortfall. As such, imports have slumped by 30%.