The upward trend in nickel values, which has been in place since the beginning of 2014, has contributed to a substantial increase in stainless steel prices in May.
Following the very rapid rise in nickel figures during the past month, transaction values for austenitic grades are predicted to climb even more steeply in June.
The LME nickel price peaked at over US$21,000 per tonne on May 13, an increase of more than 50 percent compared with its low point, below US$14,000 per tonne, in early January. In the immediately preceding week, the nickel value had rocketed by around US$2,000 per tonne, or 13 percent.
As a result, alloy surcharges for grade 304 flat products, in Europe and the United States, will be about 25 percent higher in June than they were in April and 38 percent more than the January figures.
The main driving force behind the soaring nickel price has been the Indonesian government’s ban on exports of unprocessed ores, which came into effect in January of this year. The threat of the ban had little advance influence on nickel values, as speculators were unsure how firm the government’s stance would be.
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Even after the ban came into effect, there was no panic among commodities traders, as observers remarked upon the stockpiles of nickel ore held by processors, particularly in China. Furthermore, LME nickel inventories continued to run at historically high levels. However, the upward pressure on nickel values became stronger as market players assessed the medium-term repercussions of the ban. Both technical and fundamental factors pointed to positive movements and the upswing in nickel prices accelerated.
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As the Indonesians had hoped, a number of nickel processing plants are planned or already under construction in the country. In the short term, however, Chinese nickel pig iron production is predicted to fall by around 100,000 tonnes, this year, and possibly twice that amount in 2015. Consequently, the global surplus in nickel (production versus consumption) will be cut drastically in 2014 and may even move into deficit next year.
Therefore, despite the recent significant gains, MEPS believes that the medium-term prospects for nickel prices continue to be positive. The new floor value is likely to be around the US$18,000 per tonne mark, rather than the lower figures recorded during the past two years.