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Stainless market off to negative start

The leading base metal of 2019 went into reverse in the New Year and the stainless steel market remains weak. Below is a teaser of our latest market analysis, which will be published in the next issue of Recycling International.

Having outperformed the other major base metals during 2019, nickel prices at the London Metal Exchange reversed course sharply in early 2020. LME nickel prices dropped from more than US$ 14 000 per tonne at the end of 2019 to less than US$ 12 500 per tonne as of late February, marking the worst start to 2020 among the major non-ferrous metals.

At the same time, closing stocks in LME warehouses more than tripled from less than 70 000 tonnes in late 2019 to around 230 000 tonnes in late February.

As with other commodities, nickel prices have been impacted by projected slowdowns in Chinese demand, global economic growth and international trade flows which have only been compounded by rising coronavirus concerns that have battered equity markets.

As the price of nickel has declined and the stainless steel market remains oversupplied, the prospects for stainless steel scrap have also deteriorated. The market downturn early in the year stands in stark contrast to analyst expectations for positive nickel and stainless steel market fundamentals in 2020.

Falling export demand for stainless steel scrap made for even more difficult market conditions in 2019. Despite improved demand from India, Taiwan and Malaysia, stainless steel scrap exports from the United States plunged 27% in 2019 to just under 474 000 tonnes.

Reduced stainless scrap demand from Canada, China, Mexico, Vietnam and Japan contributed to the downturn last year, the worst year for US stainless steel scrap exports since 2002.

Looking ahead, a number of market analysts are projecting a recovery in Western stainless steel markets starting in the second half of 2020 amid growing nickel demand from the electric vehicle battery market.

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