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U.S. And EU Nickel Imports From Russia Surge

Via AG Metal Miner

Nickel prices began to rise this month, breaking through prior highs visible on shorter time frames such as the hourly and daily charts. Ultimately, prices bounced off bullish zones formed before the LME’s shutdown in March. This price action indicates nickel has the potential for upside reversal if prices continue to push up. Overall, however, prices remain in a mid-to-long-timeframe trading range. Investors will need to break this to establish a new long-term trend.

High Inventory Levels Among Service Centers, Manufacturers, and End Users

Stainless flat-rolled inventories have not only built up at service centers but also at some manufacturers and end-user locations. In fact, sources tell MetalMiner that service center inventories are averaging between three and four months of supply. Optimally, service centers would only have around two months of supply. MetalMiner has also received word that some end users have more than nine months of inventory on their floors. Obviously, if end users and manufacturers are this flush with inventory, it impacts service center shipments.

The big question: how did this happen?

Entering 2022, U.S. flat-rolled stainless steel production remained constrained by strict allocations of alloys, widths, and thicknesses as directed by production mills. So, to maximize production output, North American Stainless and Outokumpu focused on producing standard 304 / 304L along with some 316L. These were mostly in widths greater than 48″ and thicknesses under 0.035.” Width, light gauge and alloy extras came about to penalize products that drained output capacity. On top of that, some stainless buyers also hedged their bets by over-forecasting 2022 requirements with the expectation that supply disruptions would continue.

Meanwhile, stainless cold rolled imports rose continuously throughout 2022, peaking between April and June. This helped bridge the U.S. supply gap, and imports started to wane as service center inventories became more robust. And despite aggressively-priced import offers, service centers soon began to pull back. Imports don’t necessarily arrive in the same month they’re ordered. Because of this, cold rolled imports continue to show up (though in much lower volumes).

SIMA Stainless cold rolled sheet and strip imports into the US.

Stainless Steel Inventory Issues Should Resolve Soon

Many of the manufacturers who overbought to avoid outages now have too much inventory. All of their sources have delivered the agreed-upon quantities, and the companies have no choice but to wait. Fortunately, those businesses that buy excess from end users may be able to reduce the latter’s inventory exposure and free up some cash. Currently, service centers are not going to buy back excess inventories. However, there are some B2B companies that specialize in aligning sellers with buyers in this situation.

Several of MetalMiner’s sources suggest that the problem of increased service center inventories may resolve as early as the end of 2022 and as late as Q1 2023. However, it’s important to also consider the potential devaluation of these inventories as 2022 marches on. For example, the 304 alloy surcharge continues to decline from its May peak. September’s 304 surcharge is also $1.2266 / lb, which is $0.6765 / lb lower than those seen in May.

U.S. and EU Nickel Imports From Russia Surge

Untouched by sanctions, Western nations continue to import Russian nickel. Indeed, shipments have actually increased since March. Russia accounts for roughly 10% of global nickel production, and its largest company, Nornickel, produces roughly 15-20% of global battery-grade nickel.

Related: China Could Ease Europe’s Diesel Shortage

The U.S. saw the largest increase. According to data from the United Nations Comtrade database compiled by Reuters, nickel imports from Russia to the U.S. jumped 70% from March through June. Meanwhile, imports to the EU during that same time rose 22%.

The increase in Russian-sourced material indicates two things. First, lower prices have likely increased the appeal of Russian nickel, as all other prices rose following the Ukraine invasion. Second, it means that the concerns over supply disruptions that caused base metal prices to surge in early March have proven overstated.

Stay up to date on MetalMiner and the stainless steel industry with weekly updates – without the sales pitch. Sign up for MetalMiner’s weekly newsletter.

But the Stainless Steel Buying Frenzy May Not Last

As the 2023 contract season begins, Western manufacturers may start to wean themselves off Russian supply. 

According to Paul Warton, Executive Vice President for Norsk Hydro’s extruded aluminum products business, “we categorically will not be buying from Russia for 2023.” Novelis Inc. has also begun to shun Russian material as it looks to feed its factories next year. In fact, early negotiations with Nornickel indicate that European buyers want to reduce their purchases almost across the board.

These sourcing shifts will likely serve to divert discounted material to companies and countries still willing to import from Russia. “I don’t know where that material will flow to now – maybe into Asia, China, Turkey, and other areas that haven’t taken as tough a stance on Russian material,” Warton added.

This could cause material sourced elsewhere to carry a larger premium. Of course, not all companies will adopt this hard-lined approach toward Russian material. And because such abstinence is self-imposed, it won’t eliminate Russian nickel from the global market. 

By AG Metal Miner

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  • George Doolittle on September 17 2022 said:
    Russia itself doesn't have that much demand for nickel i think can't be overstated enough as well as their entire Industrial Production seems to have come to a halt once combining economic sanctions from the west with a now wholly failed War effort in Ukraine now failing *"Russian NATO"* now imploding Turkish economy for some time to add War against Armenia to War upon Syria plus US demand for pure BEV now clearly on the wane at these prices indeed demand for all Das Auto at these prices in USA due to a deflating housing market bubble crash super tall building boom still raging away, plus Canadian Dollar indeed entire economy under incredible strain Because Trudeau, plus the euro collapsing still plus the British Pound collapsing still plus the Chinese Yuan still in free fall and nickel is hardly alone with this incredible bad luck of circumstance at the moment in point of fact to include copper cathodes, gold, silver, oil...natural gas got annihilated today, lumber, pork bellies, orange juice, cocoa, sugar, wheat, corn...pretty much the entire commodity complex at the moment.

    Plus the US Federal Reserve remains committed to continue to tighten/further invert/explicitly exclaim forward guidance against inflation without any care at all for the US job market.

    Not surprisingly as the US Federal Reserve has raised rates indeed inflation *HAS GONE UP* by and large and not just in the USA.
    But at some point all of these data points will converge into a massive recession as lower refined product from oil prices the past few Months seems to imply.

    A few huge winners.
    Far more simply mind blowing losers the result imho.
    Plus an entire Deck of Wildcards at the moment.

    Definitely not risk on.

    Definitely risk off.
    Long 2 Year Treasury Bonds
    Strong buy

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