China accounts for over 50% of World S/S consumption and Nickel consumption. Change in China’s economic growth has a huge impact on global supply-demand balance and hence prices. The degree of slowdown in China’s economy has caught many analysts by surprise and is compounded by suspicions that true demand is worse than official statistics suggest. The over-supply for many commodities has resulted in steep price falls over recent months. Most commodities are priced in dollars, making them more expensive in China when the yuan falls/dollar rises and China’s currency devaluation has added to price pressures.
For Nickel, a supply deficit is predicted over the next few years, but investors are holding off betting on a price increase while there are huge stocks and continuing surplus of supply over demand. When there is real evidence of stocks falling and producer production cuts, then the Nickel price will bounce off the floor. The longer current prices continue, the more likely cuts become, because a large part of the supply chain is losing money at present price levels.
For Stainless Steel, mills have been trying to implement base price increases, but availability globally has undermined this.
In China there has been a number of producer exits from the S/S market and 2 million tonnes of melt capacity closed. In Europe, the anticipated increase in demand on home mills, from anti-dumping action, has not materialised as imports arriving from other routes have filled the gap. Industry rationalisation becomes more likely as the present demand levels continue.
2016 has begun with low prices and an uncertain economic background. Economic growth and/or production cuts should start prices moving back up during the year.