Page 60 from: Out now: the summer issue!
market analysis
markets struggling as
economies contract
Gloomy forecasts for global economic growth and changing production trends
weigh heavily on scrap processors and traders.
of this year, compared to a 23 500
tonne supply deficit during the corre-
sponding period in 2019. Diminished
demand from the electric vehicle mar-
ket has been widely cited as one
source of weakness.
INDONESIAN IMPACT
Another complicating factor has been
greater Indonesian nickel pig iron (NPI)
production. Macquarie reports that,
despite the reduced availability of pri-
mary nickel units globally, the impact
of the Indonesian [nickel] ore ban on
the market ‘has been wholly neutral-
ised by a major acceleration in plans to
ramp up NPI production in 2020 and
onwards’. Macquarie projects
Indonesian NPI output will grow from
570 000 tonnes this year to 750 000
tonnes in 2021. As a result, a number
of commodity market analysts have
been cautious with their nickel price
forecasts. At the Bureau of
International Recycling’s Global eFo-
rum on Stainless Steel & Special Alloys
in June, Nathalie Scott-Gray from INTL
FC Stone predicted that the LME nick-
el price would average U$12 452 per
tonne in 2020, down 11% from the
2019 average.
STAINLESS STEEL MARKET
UNCERTAINTY
Not surprisingly, the global economic
downturn and coronavirus lockdowns
have impacted practically every seg-
ment of the stainless steel industry,
from reduced manufacturing output
that has weighed on prime scrap gen-
eration to reduced demand from the
automotive, energy, and construction
industries. Interestingly, Andy Home
from Reuters reports that even the
downturn in the hospitality industry has
important implications for stainless and
nickel market balances: ‘A wave of res-
taurant closures in the developed
world would generate a surge of
unwanted cutlery. If 20% of restaurants
closed, it would translate to around 80
000 tonnes of stainless steel scrap con-
taining 24 000 tonnes of nickel’.
Given the global slump, Scott-Gray is
projecting total stainless steel demand
will drop 12% in the second quarter of
year, creating headaches for stainless
steel market participants. While the
LME three-month nickel price has
bounced off the US$ 10 865 per tonne
bottom seen in late March with recent
trading around US$ 12 800 per tonne,
LME nickel prices are still down 9%
over the first six months of 2020.
Meanwhile, nickel stocks in LME ware-
houses have surged from just over 64
000 tonnes in November 2019 to more
than 234 000 tonnes by late June.
According to the International Nickel
Study Group, the global refined nickel
market swung to a 53 900 tonne sup-
ply surplus during the first four months
60
As economic forecasters and commod-
ity market analysts continue to revise
downward their projections for global
economic growth – and with that nickel
prices and stainless steel output – it’s
been difficult to construct a bullish sce-
nario for stainless steel scrap proces-
sors. The International Monetary Fund
now expects the global economy will
contract 4.9% in 2020, against its previ-
ous forecast in April of 3%. The IMF
also sees advanced economies, includ-
ing the USA, EU and Japan, being
especially hard hit with their combined
economic output expected to decline
8% this year. Weaker scrap metal gen-
eration and demand continue to pose
challenges for recyclers.
LACKLUSTRE NICKEL PRICES
Nickel prices have underperformed
compared to other base metals this
A large dump
truck at a
nickel mine on
South Sulawesi,
Indonesia.
60-61_manickelstainless.indd 60 06-07-20 13:18
