By Raul de Frutos
Our stainless MMI gained in February as nickel prices rebounded. Prices had fallen in December and January as Indonesia relaxed its ban on exports of nickel ore. But nickel bulls ran over the bears last month as the Philippines ordered more mine shutdowns. As we expected, the shutdowns in the Philippines are a great driver of prices.
On February 2, the Philippines ordered the closure of 21 mines, and seven others could be suspended. The nickel mines recently ordered to shut down account for about 50% of the country's annual output. As a result, investors sent nickel back to $11,000 per metric ton by the end of February.
Stainless buyers will need to monitor nickel's supply. These two major producer nations' actions will continue to move the gauge on price direction this year. Meanwhile, the demand side of the equation will likely limit any significant downside in nickel prices this year.
The Caixin Manufacturing PMI in China beat market expectations in February, rising to 51.7 from 51 in January. It marked the eighth straight month of growth, driven by faster rises in output and new orders. In addition, stock markets in China hit new highs, signaling that investors' sentiment on China's economy remains strong. This is usually a bullish sign for industrial metal prices, including nickel. This relationship has been really strong since China became the world's top producer and consumer of commodities. In the U.S., the closely watched ISM manufacturing index hit 57.7 in February, marking the highest level since August 2014.
Also in February, the Department of Commerce placed final, affirmative anti-dumping and countervailing duties on imports of stainless steel sheet and strip from China. Domestic flat-rolled mills are benefiting from these actions, with lead times of eight weeks.
What This Means For Metal Buyers
Industrial metals continue to rise on robust demand and shrinking supply. The supply/demand fundamentals of the nickel industry look more complex than those of other base metals. However, higher import duties in stainless markets and the ongoing bullish sentiment on industrial metals will at least, prevent nickel prices from significant downside moves.