News item
25 Feb 10
Banks are also Customers
After a brief correction, when prices reached a relative low of just above USD 17,000.00/mt at the beginning of the month, since the 9th February nickel has been firming up again on the London Metal Exchange. Up to this moment in time, prices of over USD 20,500.00/mt have been seen. Yet the end of this move should not have been seen. For some days now there has been a notable daily withdrawal of nickel stocks out of the LME, which has not happened in a long time.
So, that which has long been forecast here has started to happen. The recovery which has begun in stainless steel production is met by a commodity supply which is slow in building up. Especially in secondary commodities, stainless steel scrap is showing clear signs of a bottleneck, due to the small amount of new scrap available, and the reduced activity in industrial scrappage. Taking scrap to be over 50% of the commodity input share for stainless steel works, this will definitely have an influence on the supply and demand situation in the commodity market. The existing market disequilibrium will only be solved in the medium term by the price. Producers of stainless steel should be prepared for rising commodity prices and also consumers should be warned that the days of favourable purchasing prices are most likely soon to be over. Added to this, a recent study of the rating agency Moody quite correctly points out that rising commodity prices could hit the steel producers quite nastily. Some representatives of the industry even reckon with iron ore prices, for example, to rise by up to 40% in 2010. This would cause the margins of the steel producer to clearly shrink, unless they are in a position to pass the price increases on to the customers.