Strong mid-year prices for nickel reflect higher stainless steel production in China and Indonesia but Europe cries foul over cheap imports.
Among the major base metals at the London Metal Exchange, only nickel prices were in positive territory as of the end of July 2019 as compared to the end of 2018. So far this year, nickel prices have climbed 34% higher, while copper and aluminium prices have been flat and tin prices have declined 11% for the year to date.
At the LME, 3-month nickel futures traded as high as US$ 15 115 per tonne in July but have recently pulled back below US$ 14 400 per tonne. Even so, that’s up significantly from the beginning of the year when nickel prices were trading around US$ 10 500 per tonne.
The rise in nickel prices has come despite widespread concerns about the US-China trade war and rising nickel production. According to Macquarie Capital (Europe), global nickel production increased 8.9% year-on-year during the first half of 2019. Although primary nickel production has been on the rise, nickel consumption has reportedly outpaced the supply gains.
The International Nickel Study Group estimates that global refined nickel demand exceeded supply by 27 000 tonnes during the first four months of 2019, according to Reuters. The global deficit in the nickel market comes at a time of increased stainless steel production in China.
Chinese production ramping up
After getting off to a slower start in 2019, market analysts estimate that stainless steel production in China accelerated in the second quarter of 2019. According to figures from the International Stainless Steel Forum, global stainless steel melt shop production declined 2.5% year-on-year in the first quarter of 2019 to 12.46 million tonnes as Chinese production slipped 1.5%, output in the rest of Asia was off 5.7%, and stainless steel production in the United States was down 2.0%.
However, Metal Bulletin reports that for the first half of the year, stainless steel mills in China produced 14.35 million tonnes of crude stainless steel, an increase of 8.5% from the first half of 2018, based on data from the China Stainless Steel Council.
The ramping up of Chinese stainless steel production in the second quarter, along with increased output in Indonesia, have been key drivers for the global stainless steel and scrap industries.
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