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Continued market uncertainty across the sector

China’s growing production dominance and Indonesia’s control on ore supplies are a market challenge

At the London Metal Exchange last year, LME three-month nickel futures ranged from as low as US$ 10 530 per tonne in January to as high as US$ 18 850 per tonne in September. At the same time, closing nickel stocks in LME warehouses dwindled from more than 207 000 tonnes at the end of 2018 to less than 65 000 tonnes in November 2019.

Despite the on-going volatility in nickel prices and warehouse stocks, nickel outperformed the other major base metals in 2019, ending the year nearly 32% higher in London compared to the end of 2018. However, prices for stainless steel scrap came under pressure late last year amid reports of excess scrap supplies in Europe and the United States and broadly weaker nickel prices.

As with other commodities, the nickel and stainless steel markets have had to contend with rising trade protectionism, signs of slower manufacturing output in the major developed economies and heightened geopolitical risk factors. Uncertainty regarding global stainless steel demand and rising inflows of nickel into LME warehouses late in the year also contributed to price volatility.

More recently, slowing electric vehicle sales in China, falling nickel pig iron prices and weaker stainless steel production outside of China have presented additional challenges for stainless steel and stainless scrap market participants.

According to the most recent production statistics from the International Stainless Steel Forum (ISSF), stainless steel melt shop production in Europe and the United States declined 7.2% and 7.5% year-on-year respectively during the first three quarters of 2019. Compared to the second quarter of 2019, stainless steel production in Europe declined by 350 000 tonnes in the third quarter to under 1.5 million tonnes.

You can read the full market analysis in our latest issue.

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