Stainless Steel Pipes & Fittings Traders Affected by Volatility in Nickel Prices

Stainless Steel Pipes & Fittings Traders Affected by Volatility in Nickel Prices
Nickel on the LME hit a low of USD 15,176/mt April 19, down 19.14% from the USD 18,770/mt recorded in February. The prices have since recovered slightly and are now trading at USD 15, 350/MT on 25th April 2013. Demand has remained stable to lower, but the volatility in nickel has increased significantly in the past 5 years, making it difficult for the real buyers to make informed decisions.

On the demand side, nickel demand recently has been on the downward trend, owing to weak economic growth in major world economies including Europe and the United States. Another major buyer of Nickel, China, also recorded gross domestic product growth of 7.7% during the first quater of 2013 on a year on year basis, missing economists’ expectations of an 8% growth. Growth was also down compared to the last quarter of 2012, when it stood at 7.9%, raising concerns of a slowdown in the Chinese economy.

Chinese industrial production also came in weaker than expected in March. Industrial growth slowed to 8.9% on a year and year basis as compared to 9.9% gain reported in the previous month.

Stainless steel dealers had anticipated China to record higher growth, as recent economic activity showed that Chinese consumer spending had increased and liquidity was also infused by the Chinese government.

Global financial markets, especially commodities remained most affected today, as China is one of the biggest consumers of base metals and various other commodities. Nickel prices slumped, raising concerns for various stainless steel buyers.

Stainless steel traders had avoided making big ticket purchases since mid march, in anticipation that prices would come down in April. However, the prices have remained stable and markets are moving sideways. As prices, declined over 15% since February, traders believed that the nickel prices have reached a trough, and made good purchases last week. If nickel prices and demand continues to remain sluggish, both stainless steel users and stockholders could see erosion of margins, due to falling prices and lack of informed decision making.

The unpredictability in raw material prices has resulted in significant uncertainty among end users and traders of steel products. Scrap prices have also been on a downward trend, with stainless steel 304 scrap prices currently trading at US$1550/MT CIF Asia and stainless steel 316 scrap prices currently trading at US$2550/MT CIF Nhava Sheva.

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