Page 58 from: March 2016

58 March 2016

M A R K E T A N A L Y S I S

Nickel & Stainless
Closed: February 23, 2016

A market without
momentum
Compared to the prices noted in our report
of mid-January, 304 stainless steel scrap has
seen an increase from US$ 890-940 per
tonne to US$ 920-970 whereas the 316
quality is unmoved on US$ 1200-1250.
Chrome scrap prices have also made gains,
with the 409 grade advancing from US$
200-240 per tonne to US$ 220-260 and
430 material edging up from US$ 300-
340 to US$ 310-350.

Following the exchange rate shift to US$ 1.10 to the Euro at the
time of writing, the value of 304
stainless steel scrap has climbed
from US$ 890-940 per tonne at
the time of our previous report
in mid-January to US$ 920-970.
However, the 316 price remains
unchanged at US$ 1200-1250 per
tonne because of low demand for
molybdenum-containing qualities.
Despite further weakness in steel
scrap prices, chrome scrap has also
benefited from the stronger Euro to
reach US$ 220-260 per tonne for
the 409 grade and US$ 310-350 for
430 material.

Traders are complaining about small
turnovers even though demand from
the mills’ side has improved, accord-
ing to latest reports. Mills are trying
to extend the discount from the LME
quotation from 14% to 22% but low
scrap availability and some exporting
to Asia may prevent such a develop-
ment.

Reluctance to cut output
In our reporting week in mid-Jan-
uary, nickel was still commanding
US$ 8500-8750 per tonne as the base
metals were largely sidelined during
ongoing turmoil in the global financial
markets. In the following week, nickel

prices were little changed at around
US$ 8600 per tonne but, once again,
base metals were largely ignored as
the focus remained on financial market
concerns.
It was in week five that nickel prices
slumped sharply to lows around
US$ 8160 per tonne, close to key sup-
port at US$ 8000. Speculative selling
amid a rally in the US dollar triggered
sell stops against a background of
weak demand and a lack of sizeable
production cuts. It would appear that
producers are reluctant to cut output,
preferring attempts to maintain market
share and to drive competitors out of
business.

In the following week, nickel registered
a new low of US$ 7550 per tonne. These
falling prices reflected a substantially
oversupplied and seasonally weak mar-
ket for stainless steel as well as a need
for greater production cuts than have
been seen to date. Nickel was effectively
left reeling by the four ‘c’ headwinds:
that is to say, China, currency, contango
and cost deflation.
Subsequent to these lows, nickel prices
climbed quite sharply on short cover-
ing to close at US$ 8575 per tonne in
week seven. The return to work fol-
lowing the Chinese New Year holidays
coupled with prices below US$ 8000
per tonne attracted not only short
covering but also consumer bargain
hunting. At the time of writing, nickel
has stabilised at the level of US$ 8500-
8700 per tonne.
According to figures from the Interna-
tional Nickel Study Group, the surplus
of primary production to usage totalled
80 400 tonnes last year while nickel
stocks in LME warehouses still amount
to more than 430 000 tonnes.
Market participants expect a further
decline for charge chrome of up to US
cents 5 per lb for the second quarter,
with steel scrap prices expected to fall
again by Euro 10 per tonne in March. As
the experts agree, these are not the best
ingredients for a recovery in stainless
steel scrap prices.

By Gerhard Teborg et al

Closed: February 23, 2016
The Inonesian export ban is
gone…and nobody cares!
Indonesia decided to remove the
export ban on ore which enables
Chinese NPI producers again to
source high grade feedstock from
there. One year ago this would
have resulted in a collapse of the
nickel price due an expected rise
in NPI production. This year the
effect has been negligible which
is another indication that the nickel
price is already near the trough. It
remains to be seen what will hap-
pen to the ongoing NPI invest-
ments in Indonesia.