Stainless steel demand may hit nickel
An expected slowdown in the stainless steel sector in the next two months may take a toll on nickel, the main constituent in stainless steel.
Nickel prices, which have already declined considerably due to increasing supplies and falling demand, may see a further fall. According to a report by Kotak Commodities, the prices may drop to $34,500 a tonne on the London Metal Exchange (LME) next month.
Nickel for delivery in three months rose by 0.3 per cent to $42,350 a tonne on the LME on Monday. The report added that the factor that altered the ever-increasing nickel price outlook was the increasing nickel pig iron production in China. Though nickel pig iron is not expected to replace the demand for refined nickel, it will retain some market share as long as there fined nickel market remains in the deficit.
The nickel market is facing a shift in demand and supply patterns. Rising supplies of the metal in the LME-monitored warehouses and expectations of a slowdown in the stainless steel sector have led to the demand moving from refined nickel to nickel pig iron.
The supply of the metal is expected to remain tight and the nickel market runs the risk of an excessive price rally, which may destroy the demand. Many of the nickel mining projects are yet to take off, according to the report.
Nearly two-thirds of the refined nickel is used to make stainless steel. With some of the US and the European stainless steel mills announcing closure of refined nickel-based stainless steel production facilities, the demand for the metal is expected to remain weak.
Nickel industry is in the throes of major labour disputes and the current price levels can put increased pressure from labour unions for higher bonus linked to prices, which may further affect the supply side of the metal, according to the report.
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