Uncertainty surrounding Covid-19 and the rollout of vaccinations continue to dog expectations for primary and secondary trade.
As global manufacturing indicators improved in the second half of 2020, reported metal prices and corresponding scrap flows improved late in the year and into 2021. At the London Metal Exchange, nickel prices rose from US$ 16 540 per tonne at the end of 2020 to more than US$ 18 300 per tonne in late January.
At the same time, scrap market participants report that business conditions improved significantly in December and January amid rising prices and healthier demand from the manufacturing sector. But the economic, manufacturing, and commodity market rebound has started to show signs of weakness and scrap recyclers in particular are facing a range of challenges including difficulties hiring and retaining employees, transportation and logistical bottlenecks, and potentially higher regulatory costs and trade restrictions.
For nickel and stainless steel market participants, these contrasting challenges and opportunities are contributing to an increasingly unpredictable outlook this year.
According to the latest figures from the International Stainless Steel Forum, global stainless steel melt shop production bounced back 17.5% in the third quarter of 2020 as compared to the preceding quarter to more than 13.5 million tonnes. The rebound in stainless production in the third quarter was widespread, including quarter-on-quarter gains in China (+14%), the United States (+10.9%), Europe (+5.4%), and Asia excluding China and South Korea (+50.6%).
Even so, ISSF estimates global stainless melt shop production declined 7.8% during the first nine months of 2020 to 36.7 million tonnes as Covid-19 shutdowns weighed on production in the first half of the year.
The decline in stainless steel output in the second quarter of 2020 and the subsequent rebound were also reflected in major economic and manufacturing reports. In the US, for example, the Bureau of Economic Analysis reports real GDP plunged 31.4% in the second quarter followed by a record 33.4% increase in the third quarter – effectively restoring the previous position.
The months’ long shutdown in most of the developed economies in early 2020 resulted in a shortages of manufactured goods and raw materials, followed by considerable pent-up demand and rising prices as global supply chains were impacted.
According to IHS Markit’s latest Composite PMI report, ‘significant supply chain delays, raw material shortages and evidence of stockpiling at goods producers pushed input prices up in January. The rate of cost inflation was the fastest since April 2018, with firms raising output charges at the sharpest pace since July 2008 in an effort to partially pass on higher cost burdens to clients.’
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