Normandy Metal Industry Co., Ltd.
Normandy Metal Industry Co., Ltd.

The Stainless Steel Market Shows Mixed Signals Of Optimism And Concern

Apr 15 , 2024

According to MetalMiner news on April 9, 2024, nickel prices continued to rise in the first half of March, temporarily halting from the long-term downward trend. However, prices peaked on March 13, reaching levels not seen since October 2023. Then, the rally collapsed and the price fell again. Overall, nickel prices fell 5.56% month-on-month.


From March to April, the stainless steel monthly metal index (MMI) fell by 3.16%.


1. Falling nickel prices ease stainless steel market sentiment

As usual, the stainless steel market experienced a seasonal recovery in the first quarter compared with the fourth quarter, although lower nickel prices appeared to dampen these gains.


Dealers reported improved demand conditions, suggesting the market bottomed out in the fourth quarter. However, some noted that the first quarter was a "disappointment" from a historical perspective. While details are limited, Outokumpu's recent muted calls ahead of its quarterly financial report suggest the U.S. market will strengthen. This is in stark contrast to their Q4 2023 commentary, which suggested that the U.S. market had not yet hit bottom.


A rebound in nickel prices triggered an increase in buying activity. However, as nickel prices begin to retreat, sentiment appears to be weakening as stainless steel surcharges appear destined to fall again. As of end of first quarter, dealers still describe stainless steel market as 'slow'


2. Short Nickel Outlook Amid Inventory Surge

Although nickel prices bottomed again on March 27, the outlook remains bearish. There is little evidence that prices are about to break out again. Meanwhile, the threat of mine closures and process delays from Indonesia has provided brief relief to a market that otherwise looked oversupplied. Therefore, the recent price rally is more likely to be "market noise" than a meaningful shift in trend.


Although they do not have a significant correlation with price, LME inventories continued to swell throughout March and are currently at their highest levels since May 2022. This trend is directly opposed to markets such as copper, where inventories will continue to decline until the supply outlook becomes increasingly tight. While both nickel and copper prices have appeared bullish in recent months, optimism in the copper market remains driven by fundamental expectations. However, the situation in the nickel market shows a very opposite trend.


Since 2012, LME copper and nickel prices have shown a historical correlation of 71.74%. While both markets will benefit from demand in certain categories, such as electric vehicles, supply conditions may weaken current mediocre relevance in the coming years.



It will hardly come as a shock to anyone who has followed the market in recent months that Indonesia is now a big (and getting bigger) player in the nickel market. Indonesia is estimated to account for about half of global primary nickel production in the coming years, giving the country significant control over the direction of the market.


Indonesia has also made clear its intention to keep nickel prices below $18,000 per ton. For reference, as of April 3, nickel prices were $17,080 per ton. According to the Financial Times, more than half of the world's nickel production will be unprofitable if the price drops to $16,500. However, Indonesia will be largely isolated from it due to its use of cheaper energy sources such as coal. In the absence of government support, lower prices appear to lead to more output being taken offline. If that happens, it could provide support to the market. However, as Indonesian production levels continue to rise, price risks remain.

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