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Stainless steel market stabilises, nickel surplus persists  

While recyclers generally report a better-than-expected start to the year, persistent surpluses, falling prices, and geo-political and financial risks continue to cloud the outlook.  

In a reversal of last year’s performance, nickel prices in 2023 have been underperforming the other major base metals at the London Metal Exchange. Having started the year around US$ 31 000 per tonne, LME cash prices were trading below US$ 23 000 by early March. While inventories in LME warehouses remain tight at less than 45 000 tonnes, Class 1 LME stocks represent a declining share of the global supply chain.

According to Macquarie Research, world nickel production increased 16.6%, or by 444 000 tonnes, to 3.13 million tonnes in 2022, the largest annual production increase on record. Given the significant disparity between the production levels of Class 1, Class 2 (including nickel pig iron), and nickel intermediates, the Macquarie analysts note ‘the importance of analysing nickel markets in specific submarkets has never been more important with prices of finished nickel products performing radically differently in 2022’.


A significant share of the last year’s increase in nickel supply came from the commissioning of Jiangsu Delong’s new NPI facility (PT Gunbuster Nickel), with an annual production capacity of 240 000 tonnes. Rising Indonesian NPI production has not only been weighing on the price of Class 2 nickel – which according to Edward Meir from the Marex Group accounts for up to 70% of the primary nickel supply chain – it has been a source of price weakness across the nickel and nickel-based product markets.

As noted by Andy Home at Reuters: ‘An increasingly diverse physical market needs a better hedging toolkit: and sooner rather than later because Indonesia’s ever-rising production is driving ever-deeper wedges into the global pricing system’.

Investor confidence in the nickel market, already at low levels thanks in part to the LME meltdown last year, has also been impacted by fraud allegations in the first quarter of 2023. In February, Switzerland-based trading giant Trafigura claimed a US$ 577 million charge due to ‘systemic fraud’ surrounding the delivery of containerised material that reportedly contained carbon steel and other materials instead of the agreed upon nickel.


Following a challenging year in 2022 that saw falling stainless steel production and consumption levels globally, analysts have become more optimistic recently regarding market fundamentals. According to latest projections from worldstainless, global consumption is expected to rebound from a 0.6% contraction in 2022 to a 3.2% increase in 2023. The projected increase this year is expected to be driven by demand growth in China (+3.1%) and Asia ex-China (+5.5%).

Recent manufacturing sector data out of China appears to lend some encouragement, despite a slower start to the year for Chinese electric vehicle sales in January.

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