Stainless steel consumption is subdued, at present and is predicted to remain so in the near term. Consequently, nickel supply will be in surplus, this year and stock levels will continue to grow.
Selling values are likely to move within a narrow range and we forecast the average LME cash figure for this year to turn out slightly below that for 2012.
MEPS International Ltd has often observed that commodity prices tend to follow the trends in global financial markets, instead of being driven by fundamentals. More specifically, the price of nickel-bearing stainless steel has been disproportionately affected by institutional investors on the commodity markets, rather than by the supply and demand outlook for the physical metals.
However, in the recent past, there has been a divergence between commodity values and other economic indicators. For example, London's FTSE 100 Share Index has increased by over 8% since the beginning of 2013. New York's Dow Jones Industrial Average has climbed by over 10% during the same period and recently achieved a record high figure. In contrast, the LME Nickel Cash price, in common with the values for other traded metals, has fallen in the last three months.
It appears that the metals markets are behaving how we would expect them to, according to fundamental factors, while speculators have preferred to take a punt on rising equity markets. US stock prices have been boosted by a number of positive economic results and forecasts. The most recent hike in share values came on the back of the announcement of a further improvement in employment figures, for February.
On the other hand, news coming from China has been less encouraging. Growth forecasts have been revised downwards. Government moves to restrict the real estate boom in the country have had a negative effect on global metals markets.
This may point to a swing in the influence of different factors on commodity prices. The burgeoning industrial development in the emerging nations of Asia and elsewhere may have tipped the balance. The fundamentals of supply and demand will have a greater effect on the price of steel, metals and other commodities, while the more hypothetical trends of the Western financial markets will hold less sway.
Source: MEPS - Stainless Steel Review Source: www.meps.co.uk