At the end of 2022, the nickel futures prices soared again to 230,000 /mt, and the prices of stainless steel futures also rebounded steadily after diving in the middle of the month. In the spot market, the demand for nickel and stainless steel was both weak and trades were thin. As the Chinese New Year (CNY) is imminent, the pre-holiday stockpiling of companies involved in stainless steel industry chain have been active and here is an overview.
Downstream enterprises of pure nickel: According to SMM research, some nickel-based alloy companies plan to maintain normal production during the CNY holiday. To this end, these companies are inclined to stock up in early January considering the potential suspended logistics during the holiday. A few small alloy companies still have plans to stop the production during the holiday. As such, the increase in the demand for pure nickel from the alloy sector before the holiday is limited. In addition, due to the sluggish market this year and the impact of the covid-19 pandemic, the electroplating plants took holiday in advance at the end of December after the orders were delivered. They will not resume the production until the Lantern Festival finishes. Since the nickel prices hovered at high levels throughout December, electroplating plants mainly purchased raw materials when the prices were acceptable, thus their inventory of low-priced raw materials has been relatively sufficient. At present, SHFE nickel prices hit an eight-month high. The majority of electroplating plants, who have no production schedules in January and are concerned about financial costs amid unstable nickel prices, have no clear restocking plans. As for nickel wire and nickel mesh sectors, it is expected that they will be less affected by the pandemic in January. At the same time, manufacturers will have to purchase raw materials as they plan to maintain normal production during the CNY holiday. In this context, the index for raw material inventories in January 2023 may rise. The demand for pure nickel from the NiMH battery sector has been poor. The sharp decrease in the orders from old customers and another spike in nickel prices increased the pressure on the NiMH battery enterprises, who thus had no pre-holiday stocking plan. Most companies are generally pessimistic about the market outlook, and have plans for early holidays.
Downstream enterprises of nickel ore: In December, the transactions of nickel ore were muted. By the end of the year, the CIF transaction prices and quotes of Ni 1.3% nickel ore stood at around $/wmt. The demand for nickel ore from NPI plants is usually flat during the CNY holiday because NPI plants tend to start concentrated stocking before the rainy season. It is mainly because that the shipment of nickel ore in the southern part of the Philippines is limited during the rainy season. As the NPI prices remained rangebound, the willingness of NPI plants to increase the production was not strong. Therefore, they have consumed nickel ore at a steadily pace. According to data on the in-plant inventories and the laterite nickel ore inventory at ports, the raw materials for NPI have been relatively sufficient.
Companies involved in the nickel sulphate industry chain: In terms of nickel sulphate, nickel salts plants so far have sufficient raw material stocks as they maintained normal stockpiling to deliver long-term orders before the holiday. But some nickel sulphate producers reduced the output in December owing to maintenance and weak downstream demand. Therefore, the raw material consumption was relatively slow, and the growth of raw material inventory added to the financial costs. In terms of downstream demand, due to the removal of the new energy vehicle subsidies, the production reduction at the ternary precursor plants was significant within the month, resulting in a large decline in the demand for nickel sulphate. As some ternary precursor manufacturers already had sufficient nickel sulphate stocks to sustain them before the new year starts, they were not interested in stocking.
Stainless steel mills using NPI: With the imminent New Year’s Day, almost all stainless steel mills have stocked enough raw materials for the production in January. The raw material inventory of some could even support them through the Chinese New Year holiday in February. Basically, most stainless steel mills have already stocked raw materials for January when they stockpiled in mid-December. A small number of plants also stocked up at the end of December. A few may purchase more raw materials after the New Year’s Day to secure the production during the CNY holiday. Generally speaking, most stainless steel mills already finished stocking. In this case, the NPI supply in the spot market was tight, and the inventory of NPI plants dropped palpably. As for the Indonesian NPI, most cargoes were sold based on long-term orders considering the long shipment time, so there were few goods available in the spot market. Nevertheless, some traders, who are optimistic about the market outlook, still have some domestic NPI and Indonesian NPI at hands. It is expected that some of these cargoes will enter the spot market after the New Year’s Day.
Stainless steel mills using ferrochrome: The spot supply of ferrochrome at the end of the year continued to be tight. Although some stainless steel mills already prepared for procurement in advance in early December, but the ferrochrome available in the spot market was tight. On the one hand, the operating rates of ferrochrome plants in south China stayed low as more plants were closed with the arrival of dry season. On the other hand, most ferrochrome plants in north China maintained the production only to deliver the long-term orders. In addition, the recent rise in the prices of chrome ore and coke has pushed up the costs of ferrochromium smelters. Stainless steel mills further raised the bid price of high-carbon ferrochrome for January to ensure the demand for winter stocking before the holiday.
Restocking of stainless steel: At the end of the year, the overall trades in the stainless steel market were sluggish. The spread of the pandemic has affected the trades and processing of stainless steel, resulting in low operating rates of processing plants in many places. Some processing plants planned to take early holidays. The stocking of different series of stainless steel is different. The downstream enterprises of #200 series stainless steel have not yet started stocking in an intensive way. Traders already stockpiled some #300 series stainless steel, but downstream enterprises were not willingness to stock up. The market still stand wait-and-see until the price and terminal sentiment show a clear trend during the period from New Year’s Day to the Chinese New Year. If the impact of the pandemic subsides then, terminal consumption may pick up, and downstream companies may consider stocking. The recent transactions of #400 series stainless steel were relatively brisk. The main reason is that some processing plants have gradually resumed the operation to fulfil the delayed orders. At the same time, the #400 series stainless steel futures prices have been on the rise following the raw material prices, so the processing plants were willing to restock.
