Stainless Steel Prices and Nickel News, Prices, LME Nickel Price, Stainless Steel News – Molybdenum – World Metal Pricing and Market Conditions
Today’s official closing prices – cash – $17.80/lb – 3 month buyer – $17.60/lb (16.56% higher than 1/1/107). Comment – What a difference two months makes. If we had told you 60 days ago, that inventories fell overnight, PT Antam of Indonesia was having trouble with their smelter, and first quarter production at a nickel mine in Zimbabwe had fallen by over 10%, prices could have easily added $.25/lb to $1/lb in a day of trading. Yet, today, with all that news being reported, the market pooh-poohed it as insignificant, and the price fell hard yet again. Two months ago, the bulls were blowing off demand threats and pig nickel production as meaningless, and yet today, that is all everyone is talking about. So, the question should be, have the fundamentals changed that dramatically in the course of a few months? Or is the market being driven strictly by sentiment? And if the latter is true, how much of the recent bull run-up was due to sentiment?
On the fundamental side, we are seeing little evidence of a major change. However, there are some points that are interesting. In 2006, nickel inventories started the month at 18,186 tonnes and ended the month at 10,548 tonnes. During that time, the price of nickel basically stayed the same. The prior June, 2005, nickel inventories started the month at 8,064 tonnes, and ended the month at 7,248 tonnes. The price of nickel actually slid by about $.50/lb (7%) that June, from around $7.26/lb to $6.78/lb. So far this month, inventories have grown from 7,914 to 9,276 tonnes. If this continues, it would be the first June in the last three, to show an increase. So is demand falling because of the typical slow summer season, or is it because of substitution? It would be easy to blame it all on European vacation’s, but isn’t that an easy cop-out? June of 2005 and 2006 were also in the “typical slower summer season”, but their inventories showed declines. Could it be that the threatened substitution is having a bigger effect than many thought? We feel it is very possible, and as we have stated before, nothing motivates end-users to deviate from an established pattern, than anger. Those of us in sales, know there is no better candidate for a new customer, than one who is angry with someone else. 300 series austenitic stainless answered many corrosion problems, and had so many attributes, that after years of proving itself, it has become the industry accepted ‘norm’, and readily available. It will be months before we start seeing any numbers to prove if substitution is having an effect, but for those who have been dismissing the threat, we feel you would be wise to give it some attention. Pig nickel production in China is obviously making an impact. Although as the price continue to fall, that addition to the supply chain itself becomes threatened. At $20/lb, it is economical to produce nickel this way. As we near the $15/lb mark, that starts coming into question. On the supply side, the LME inventories tell the story. While the vast majority of nickel is sold directly from mine to consumer, the LME warehouses give us a gauge to monitor the amount of “extra” nickel out there. However slowly, it has gained this month, and traders are drinking it in like a tea cup of water in the desert. We say desert, because in our opinion, we don’t see any major lakes on the horizon. Yesterday’s “extra” inventory stored in LME warehouses gave us no gain, but the Singapore warehouse shipped out 6 tonnes, thus the decline. Cancelled warrants also increased from yesterday, hitting the double digits for the first time this month. So, have the fundamentals really changed? Somewhat, but not enough to convince us we can’t be right back to where we were, in a few short months.
And thus, we give credit, or blame, depending on which side of the nickel chain you sit, for the current price correction on sentiment. If you look back at the 2005 figures we gave above, you can see why there are many of those in the stainless steel industry, that feel the current inflated prices have always been more speculative trading, than based on fundamentals. Why is nickel worth so much more today than it was 2 years ago, when we had less nickel readily available? Like many correction’s, this one seems to be caught in its own gravitational momentum, much like many believe, the last balloon ride in pricing was due more to the abundance of hot air, than facts. There is also still the question out there of why the LME rule change put the market in such a panic. Is the bull run over? There are things to keep in mind; that might answer that question. The 1.3 billion people in China aren’t going to suddenly decide growing rice was more fun that building skyscrapers, and that being poor was more fun than earning an income and buying new things, many made from metals. Their 1.1 billion neighbors in India are just starting to warm up to the idea of mega-growth. Economies worldwide are booming, so demand in nickel, even if tempered by substitution, even if partially met by pig nickel, isn’t going to do anything but increase. And as the price declines, the desire for substitution wanes, and the pig nickel source is put into question, and we crawl right back into a sinking boat. There are some major new sources of nickel coming down the pike, but not for awhile, and there are numerous problems we expect to see happen, before they can produce significantly.
What will happen tomorrow, or the next, is anyone’s guess at this point, but today, nickel took a beating. 3 month nickel fell by almost $3000/tonne, ending trading at $16.99/lb ($37,450/tonne) (Dow Jones – more)
Nickel hits five-month low on China steel threat – “Nickel prices fell more than five percent on Tuesday as worries about falling demand intensified after news that China may cut stainless steel output, while copper prices slipped.” – article here and more
Zimbabwe’s Bindura Nickel Corporation focuses on difficult year ahead – “Bindura Nickel has reported a 10% drop in nickel sales from 5,994 tonnes to 5,374 tonnes for the period ended March 31, 2007 because of reduce nickel concentrate output from mines.” – more here
Indications at 7:50 am CST show nickel getting hit hard again, selling down $.71/lb. Nickel is currently winding down AM kerb trading in London. We will update if we see any major price movement from this amount. (Bloomberg – more)
Tomorrow is third Wednesday prompt date on the London Metal Exchange
Rand Merchant Bank Base Metals Weekly – pdf here
China stainless steel mills mull production cut – “Stainless steel makers in China, the world’s largest producer, are considering cutting production to prevent prices from weakening further, company sources said on Tuesday. ” – article here
Indonesia Aneka Finds Minor Leakage In Feni III Smelter – “PT Antam Tbk announces today it has lowered the power load of the FeNi III smelter due to a small metal leak from the furnace wall. Based on a preliminary investigation and opinion from Antam’s external consultant, the FeNi III smelter is expected to reach its normal operating load in a maximum of three weeks. The leak is different from and not related to the previous metal tap hole leak, which occurred on July 1st, 2006. The leak occurred at 9:00pm Central Indonesia Time on Saturday night, June 16th, 2007 and no one was injured. ” – more here
- No Major Upturn in EU Steel Prices Expected for Third Quarter – “The EU strip market is relatively quiet ahead of the conclusion of price negotiations for third quarter business. Service centres are well stocked until September and are in no rush to settle. Traders are waiting for new offers from Chinese mills following the recent changes in export taxes. EU steelmakers appear to be controlling production in-line with demand quite well.” – more here
- Nordic Steel Price Forecast – Long Products – “MEPS Nordic Average Merchant Bar and Drawing Quality Wire Rod prices peaked in Spring at record levels – based on increases in scrap costs and a shortage in supply. In recent months scrap values have fallen. This is expected to result in a gradual decrease in transaction figures for over the next few months.” – more here
Stainless steel demand may hit nickel – “An expected slowdown in the stainless steel sector in the next two months may take a toll on nickel, the main constituent in stainless steel.” – article here
First shipment of ore from Sarkiniemi delivered to Hitura Nickel Mine, Finland – “Belvedere Resources Ltd. (the “Company”) is pleased to announce that the first shipment of ore from the newly opened Sarkiniemi Nickel Mine has been delivered to Hitura for processing. The shipment consists of approximately 150 tonnes of ore, which has been assayed at 1.17 %Ni and 0.52 %Cu. The ore will be blended with ore from Hitura to confirm optimum mixing parameters for an ongoing Hitura – Sarkiniemi ore blend.” – more here
Corrected copyright Dow Jones Newswire – S Korea To Lower Import Tariffs On Nickel Pdts – “South Korea’s Ministry of Finance and Economy will lower import tariffs on nickel products such as ferro-nickel and nickel ingot to 1% from 3%, while the import tariff on nickel powder will be reduced to 3% from 5% in the second half of this year amid surges of international prices, the ministry said last week. (“S Korea To Lower Import Tariffs On Nickel Product Imports,” published at 0411 GMT June 18, misstated the change in import tariff for nickel powder.)”
Today’s beginning nickel inventory – minus 12 tons = 9,276 tonnes (10.09% – 936 tonnes cancelled warrants)