Stainless Steel lead times at EU mills are extended already to end September, ahead of the summer shutdown. The high stocks at distributors, built up ahead of the anti dumping duties, are being used up. A Nickel price increase, coupled with tighter Stainless availability could lead to end-user re-stocking of Stainless and a fast rise in stainless mill base prices.

Nickel has become an investment commodity, which influences the price as much as real consumption. Price volatility has been increased since the launch of Nickel on the Shanghai Futures Exchange in March this year.

Nickel stocks on the London Metals Exchange are equivalent to more than 3 months World demand and this has been holding the price down this year. The level of stock is a closely watched indicator and when it starts to fall then speculators start to drive the price up.

An export ban from Indonesia was forecast to lead to a Nickel supply balance and prices to rise. The supply of more ore than expected from the Philippines coupled with low demand and high stocks has negated this so far.

The high stocks of raw material are gradually being used, and Nickel pig iron production in China has fallen due to the low prices

Prices are probably at the bottom, since not many Nickel producers can cover their operating costs at these levels and certainly no return on capital. If the Nickel price continues to fall, or even remains at these levels for long, there would be Nickel mining and refining closures.

The price can swing rapidly as we have seen recently, when there is a change in investor perceptions. Further credit easing, or QE, in China could lead to a rebound and many economists are predicting further easing.

A scenario is that Nickel remains in the current range until end Q3 this year and then rises quickly. Most forecasters agree there will be a 2016 supply deficit and could lead to much higher prices, before Nickel starts to return to balance in 2017 and 2018.

Economic stimulus in China on the one hand could lead to this occurring earlier, or an economic shock on the other would delay, but Stainless price increases are on the way; it is only the timing which is not clear.