Nickel prices started the month higher, breaking previous highs seen on shorter timeframes such as the hourly and daily charts. Finally, prices rebounded from the bullish zone that formed before the LME closed in March. This price action suggests that nickel has the potential to turn higher if prices continue to rise. Overall, however, prices remain in the medium to long-term trading range. Investors will need to break this in order to establish a new long-term trend.
Stocks of flat stainless steel increased not only in service centers, but also in some manufacturers and end users. In fact, sources told MetalMiner that the average stock of inventory at service centers is between three and four months. Ideally, the service center should have a supply of only two months. MetalMiner has also received information that some end users have more than nine months of stock on their floors. Obviously, the availability of such stocks from end users and manufacturers will affect the supply to service centers.
In 2022, U.S. flat stainless steel production continues to be constrained by the strict allocation of alloys, widths and thicknesses dictated by manufacturers. So to maximize production, North American Stainless and Outokumpu have focused their efforts on producing the standard 304/304L, as well as some 316L. Most are 48 inches wide or larger and 0.035 inches thick. Width, light weight and alloy additives are starting to reduce the demands on power output products. In addition, some stainless steel buyers are also hedging their bets by repricing demand in 2022, and supply disruptions are expected to continue.
Meanwhile, imports of cold-rolled stainless steel continued to rise throughout 2022, peaking in April-June. This helped offset a supply shortfall in the US, where imports have begun to decline as inventories at service centers have risen. Despite very high import concession prices, service centers soon began to retreat. Imported goods do not necessarily arrive in the same month of the order. Because of this, imports of cold-rolled steel continue to appear (albeit in much smaller volumes).
Many manufacturers that were overbought to avoid blackouts are now overwhelmed. All of their sources have already delivered the agreed quantities, and the company has no choice but to wait. Fortunately, businesses that buy excess goods from end users can reduce the risk of end-user inventory and free up some cash. The service center will not buy back excess inventory at this time. However, there are some B2B companies that specifically link sellers to buyers in this situation.
Some sources in MetalMiner suggest that the issue of increasing stocks in service centers can be resolved as early as the end of 2022 and no later than the first quarter of 2023. However, it is also important to consider the potential depreciation of these reserves as 2022 approaches. For example, surcharges on 304 alloys have continued to decline from their peak in May. The September 304 surcharge was also $1.2266 per pound, down $0.6765 per pound from May.
Explore MetalMiner’s stainless steel cost model by scheduling an Insights platform demo.
Western countries unaffected by sanctions continue to import Russian nickel. In fact, shipments have actually increased since March. Russia accounts for about 7% of the world’s nickel production, and its largest company, Norilsk Nickel, produces about 15-20% of the world’s battery nickel.
The US saw the largest increase. Nickel imports from Russia to the US jumped 70% from March to June, according to the UN Comtrade database compiled by Reuters. Meanwhile, imports to the EU rose by 22% over the same period.
The increase in material from Russia indicates two things. First, lower prices may have made Russian nickel more attractive, as all other prices rose after the Ukrainian invasion. Secondly, it means that fears of supply disruptions that caused a sharp rise in prices for base metals in early March turned out to be exaggerated.
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With the start of the 2023 contract season, Western manufacturers may begin to refuse supplies from Russia.
According to Paul Wharton, Norsk Hydro’s executive vice president of extruded aluminum products, “we will definitely not be buying from Russia in 2023.” In fact, the first talks with Norilsk Nickel show that European buyers are looking to reduce purchases almost everywhere.
These changes in supply could move materials at a discount to companies and countries that are still willing to import from Russia. “I don’t know where the materials are going now – they could go to Asia, China, Turkey and other regions that have not taken a hard line on Russian materials,” Wharton added.
This may result in higher surcharges for materials obtained from other sources. Of course, not all companies will be so hard on Russian material. And since this abstention is voluntary, it will not force Russian nickel out of the world market.
MetalMiner’s annual forecast for 2023 comes out this week! The report confirms our 12-month outlook and provides buying firms with a comprehensive view of the fundamental factors driving prices, as well as detailed forecasts that can be used when looking for metals through 2023, including expected average prices, support and resistance levels.
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