Commodities Roundup: Nickel market disruption; autos drive steel prices up; appliance demand boosts stainless imports

commodities

For the buyers and category managers out there, especially those of you deep in the weeds of buying and managing commodities, here’s a quick rundown of news and thoughts from particular commodity markets.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

Nickel market disruption

MetalMiner’s Stuart Burns this week delved into the nickel market and the challenges nickel buyers might face.

“According to a recent McKinsey report, the stainless steel industry consumes 74% of nickel produced today, dwarfing the 5-8% going into batteries,” Burns wrote.

“But the type of nickel required for battery production is what makes supply so sensitive in the future.

“As the report explains, there are two types of nickel. Class 1 predominantly comes from the concentration, smelting and refining of sulfide ores. Meanwhile, Class 2 comes from ores, called saprolites and limonites, with higher iron and other (for batteries) levels of contaminants, such as copper.”

Furthermore, as more and more governments and businesses make the push toward “greener” production, the result could be a bifurcated nickel market, Burns explained, especially as demand for nickel from electric vehicle battery-makers rises.

“The result could be a bifurcated nickel market in the future,” he wrote. “In that vein, we could see a more commodity end Class 2 producing products, like nickel pig iron, trading at a significant discount to the premium Class 1 market. Even at the most conservative estimates, Class 1 demand will outstrip supply by 2029. At the more bullish end of the range, it could happen by 2024, according to McKinsey.”

Aluminum trades sideways

In MetalMiner's recent Aluminum MMI report, analyst Maria Rosa Gobitz recapped last month’s aluminum price movements.

“The SHFE aluminum price has traded sideways since mid-July,” Gobitz explained. “The price is averaging CNY 14,661/mt over the past three months.

“By August, the LME aluminum price started to follow the sideways trend as well, averaging $1,777/mt since then.

“However, the SHFE aluminum price continued to move higher than its LME counterpart.”

China leads the metals rebound

Speaking of China, the country’s economic recovery — fast relative to the rest of the world — has helped prop up metals markets.

“A relatively swift exit from pandemic lockdowns and the impact of stimulus-led infrastructure investment have powered China’s metals rebound,” Burns explained. “Furthermore, the Shanghai Futures Exchange has continued its summer disconnect from the London Metal Exchange aluminum price, which started in April of this year.

“The resulting arbitrage window has sucked in imports of aluminum primary and remelt alloy casting ingot. As a result, China’s imports are at levels not seen since the aftermath of the financial crisis in 2009.”

U.S. steel prices make gains

Meanwhile, in the U.S., steel prices showed some upward momentum in September.

“All U.S. forms of steel prices increased throughout September,” Gobitz explained.

“HRC, CRC and HDG prices increased rapidly by 20.4%, 16.4% and 15.4%, respectively. Meanwhile, the plate price increased 4.3%. The wire rod price increased by 1.5%.”

Circling back to the automotive sector, just as rising demand from EV battery makers is influencing the nickel market, rising automotive demand has helped boost steel prices.

“Despite full production rates, light vehicle and light truck inventories remain down 21% year over year,” she added. “This should continue to boost steel demand throughout the remainder of the year.”

U.S. imports of stainless steel surge in September

Elsewhere, U.S. imports of stainless steel jumped 76% year over year in September, according to the U.S. Department of Commerce.

The September import total also marked a 42% increase from the 2019 monthly average.

Demand has come, in large part, from the appliance sector (as anyone who has gone appliance shopping can attest).

“The higher-than-usual import total is in line with the unexpected demand increase in major appliances, which use stainless steel sheets,” Gobitz explained.

“The U.S. market has a shortage in most appliances. This is due to customers storing larger amounts of food, plus shutdowns or personnel reduction manufacturers undertook for a few months. Additionally, manufacturers did not ramp up production to full capacity due to economic uncertainty.”

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