NICKEL PRICES DRIVING THE STAINLESS STEEL MARKET HIGHER
Nickel prices at the time of
writing, hovered around $US30,000 per tonne. This suggests that
alloy surcharges on stainless steel will remain at their current
unprecedented high levels for at least two months.
For type 304 flat products, surcharges in
October will be in excess of €1,900 per tonne in Europe and more
than $US2,500 per short ton in the US. Alloy surcharges have risen
by more than 150 percent since January.
The LME price of nickel has doubled since
March, and there is much controversy about the reasons for this.
Users continue to claim that the nickel market is not
under-supplied, and that the upsurge in prices is the result of
speculation by financial investors. It is true that LME nickel
stocks have been extremely low. And this tends to support the
opinion of those who say there is a structural shortage.
The hike in nickel prices is increasing the
supply of scrap onto the market. World trade in stainless scrap has
risen by more than 1 million tonnes over the last four years. But so
far this is not having a dampening effect on the price of nickel.
Record levels of stainless steel production
have certainly helped keep the figures high. Output of crude
stainless in the first half of this year was almost 13.9 million
tonnes – up by 6.5 percent year-on-year. Intriguingly, figures
from the International Stainless Steel Forum reveal that most of
this increase took place in the second quarter of the year: output
in April-June was 12.6 percent higher than in the same period a year
earlier. This is likely to have continued into the third quarter –
as the nickel prices headed up from $US20,000 per tonne to $US30,000
per tonne between June and August. There may also have been some of
double booking, with buyers anxious to secure material in advance of
September and October when the extremely elevated alloy surcharges
came into effect.
There is certainly a danger of the market
over-heating. Many of these duplicate orders may be cancelled. If
the nickel price shows any sign of weakness, stainless buyers will
be encouraged to hold off from placing new orders in the expectation
of surcharges falling.
Source: MEPS - Stainless
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