Page 70 from: Recycling International – March/April issue 2023

MARKET ANALYSIS

Market stabilises but
surpluses persist
While recyclers generally report a better-than-expected start to the year, per-

sistent surpluses, falling prices, and geo-political and financial risks continue to

cloud the outlook.

nickel supply chain – it has been a
source of price weakness across the
nickel and nickel-based product mar-
kets. As noted by Andy Home at
Reuters: ‘An increasingly diverse phys-
ical market needs a better hedging
toolkit: and sooner rather than later
because Indonesia’s ever-rising pro-
duction is driving ever-deeper wedges
into the global pricing system’.
Investor confidence in the nickel mar-
ket, already at low levels thanks in
part to the LME meltdown last year,
has also been impacted by fraud alle-
gations in the first quarter of 2023. In
February, Switzerland-based trading
giant Trafigura claimed a US$ 577 mil-
lion charge due to ‘systemic fraud’
surrounding the delivery of contain-
erised material that reportedly con-
tained carbon steel and other materi-
als instead of the agreed upon nickel.

RECOVERY AHEAD?
Following a challenging year in 2022
that saw falling stainless steel produc-
tion and consumption levels globally,
analysts have become more optimistic
recently regarding market fundamen-
tals. According to latest projections
from worldstainless, global consump-
tion is expected to rebound from a
0.6% contraction in 2022 to a 3.2%
increase in 2023. The projected
increase this year is expected to be
driven by demand growth in China
(+3.1%) and Asia ex-China (+5.5%).
Recent manufacturing sector data out
of China appears to lend some
encouragement, despite a slower start
to the year for Chinese electric vehicle
sales in January. According to S&P
Global, the headline Caixin China
General Manufacturing PMI increased
from 49.2 in January to 51.6 in
February, signalling the first improve-
ment in overall Chinese business con-
ditions in seven months as Covid
restrictions were relaxed.

UTILISATION RATES
Market conditions in the West are also
looking up and may benefit from capac-
ity expansion plans. Earlier this year,
North American Stainless announced a
US$ 244 million expansion at its Ghent,
Kentucky facility that would boost the

tance of analysing nickel markets in
specific submarkets has never been
more important with prices of finished
nickel products performing radically
differently in 2022’.

FRAUD CLAIMS
A significant share of the last year’s
increase in nickel supply came from
the commissioning of Jiangsu
Delong’s new NPI facility (PT
Gunbuster Nickel), with an annual pro-
duction capacity of 240 000 tonnes.
Rising Indonesian NPI production has
not only been weighing on the price
of Class 2 nickel – which according to
Edward Meir from the Marex Group
accounts for up to 70% of the primary

70

In a reversal of last year’s perfor-
mance, nickel prices in 2023 have
been underperforming the other
major base metals at the London
Metal Exchange. Having started the
year around US$ 31 000 per tonne,
LME cash prices were trading below
US$ 23 000 by early March. While
inventories in LME warehouses remain
tight at less than 45 000 tonnes, Class
1 LME stocks represent a declining

share of the global supply chain.
According to Macquarie Research,
world nickel production increased
16.6%, or by 444 000 tonnes, to 3.13
million tonnes in 2022, the largest
annual production increase on record.
Given the significant disparity
between the production levels of
Class 1, Class 2 (including nickel pig
iron), and nickel intermediates, the
Macquarie analysts note ‘the impor-

70-71_manickelstainless.indd 70 15-03-2023 11:50