Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

A spike in stainless steel (SS) consumption is pushing average global nickel prices to reach an all time high in 2020. The official three-month LME nickel is up by 27pc ot $3,044/mt from its lowest level this year and settled at its year-high at $14,186/mt on August 13. LME Nickel is in turn pushing prices of SS scrap. 

 

China, the biggest producer of SS products and consumer of SS scrap has increased consumption of nickel ore. China’s economy has taken a sharp turn post COVID-19 with the government’s impetus and its central bank taking several measures to uplift its economy. This has resulted in infrastructure and other sectors that consume SS to speed up, leading to a big appetite for SS scrap and nickel ore.

 

In June, China imported 116,979mt of SS ingots, up from 488mt imported in June 2019 and from May 2020 imports rose 57pc. Of these imports, 95pc was of Indonesia origin. China imported 3.4mn mt of nickel ore in July, up by 19pc from the prior year and up 106pc from May. 

 

In India, prices of 304 and 316 solids prices have jumped to almost January levels on the back of LME nickel gains and demand in India, which slowly returned in August. 

India 304 and 316 import rates are rising in line with rise in LME nickel as demand for stainless steel is gradually improving post COVID-19. 

 

The 300 series grades that contain high nickel are in demand. 316 has around 10-14pc nickel while 304 has 8pc nickel which makes the former more expensive.  Despite a healthy demand from China, there is still a surplus of nickel with high supply from Indonesia and the Philippines.

 

Prices of nickel also rose on the back of Tesla CEO Elon Musk’s demand for nickel. “Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” he said with am aim to make batteries for electric vehicles. 

 

Demand from SS producers, except Chinese makers, is not very strong and has only recently started seeing green shoots. However, SS sector’s demand is much larger than that of battery makers’. 

 

The International Nickel Study Group (INSG) estimates global refined market to be in a supply surplus of 57,300mt after the first five months of 2020, representing a sharp turnaround from a deficit of 31,500 tonnes at the same point of 2019.

 

Going ahead, nickel prices could sustain the present price levels but if demand globally improves from SS producers, then nickel and SS scrap prices would climb further.

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