MARKET ANALYSIS
Market off to negative
start in 2020
The leading base metal of 2019 went into reverse in the New Year and the stain-
less steel market remains weak.
million tonnes. Non-Chinese growth
as a whole fell 6.2% year-on-year in
2019, compared with 2018 growth of
7.7% (mainly Indonesia).’
Tsingshan, the world’s largest stainless
producer, is estimated to have
increased its stainless melt shop pro-
duction by a remarkable 23% in 2019
to nearly 11 million tonnes. In con-
trast, Macquarie estimates that
European stainless steel production
fell by around 7% year-on-year to its
lowest level since 2009.
SHIFTING TRADE LANDSCAPE
Falling export demand for stainless
steel scrap made for even more diffi-
cult 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 contribut-
ed to the downturn last year, the
turn early in the year stands in stark
contrast to analyst expectations for
positive nickel and stainless steel mar-
ket fundamentals in 2020.
TSINGSHAN’S 23% GROWTH
According to the International Nickel
Study Group’s preliminary estimates,
global demand for nickel exceeded
supply by more than 30 000 tonnes in
2019 as usage increased 3.2% year-
on-year to 2.4 million tonnes. At the
same time, Macquarie Research esti-
mates global stainless steel produc-
tion rose 2.4% in 2019 to 53.4 million
tonnes. According to Macquarie,
‘almost all of the growth over this
period occurred in China, where out-
put lifted 10% year-on-year to 30.5
64
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
Is Stainless steel virus proof?
The stainless steel production in China will decline by 10
– 15% in Q1 caused by the widespread Coronavirus. This
results in a lower than expected nickel consumption and rising stocks on
the LME and elsewhere. Thus, nickel prices will continue to drop until we
see some supply-side reaction.
35,000
32,000
29,000
26,000
23,000
20,000
17,000
14,000
10,000
8,000
5,000
000 tonnes in late February.
As with other commodities, nickel
prices have been impacted by project-
ed slowdowns in Chinese demand,
global economic growth and interna-
tional trade flows which have only
been compounded by rising coronavi-
rus concerns that have battered equity
markets. As the price of nickel has
declined and the stainless steel mar-
ket remains oversupplied, the pros-
pects for stainless steel scrap have
also deteriorated. The market down-
64-65_manickelstainless.indd 64 05-03-20 12:32
