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|Extent And Whereabouts of Influence On Raw Materials Arisen From S/S Cutback Of 500,000 Tons|
|Oversupplies Of Both Nickel And Chrome Come Up To The Surface|
Stainless steel mills of the western world have implemented to decrease their production of stainless steel on a substantial scale from July - September quarter of this year and many of them continue this cutback in October - December quarter. Consequently, it is estimated that the world production of stainless steel in 2005 will be decreased by 50,000 tons per annum on crude steel base. The cutback on production of stainless steel has been concentrated on the mills in Europe and East Asia ( excluding China ). European mills carried out this cutback in July - September quarter and are scheduled to return to a normal production pace from October - December quarter but the mills in East Asian countries, including Japan, South Korea and Taiwan, will continue to decrease their production of stainless steel in October - December quarter, although an extent of the cutback is uneven. There is a view in the market that the quantity of stainless steel to be decreased by Japanese mills in 2005 is larger than that as initially estimated and will reach 300,000 tons per annum.|
In consequence, the oversupplies of nickel and chrome have come up to the surface. An impact to be caused by the cutback of 500,000 tons per annum is estimated at a decrease of 40,000 tons of nickel content to be consumed and, as half of this nickel content is charged on nickel-based stainless steel, an actual decrease of nickel consumption will be 20,000 tons. Nickel producers of the world are changing their estimation of nickel consumption in 2005 from July - September and forecasted a short supply of nickel at the beginning of this year but have now rectified their estimation of supply and demand as to be balanced. Namely, the world supply of nickel has turned from the state of watershed to its oversupply because of a decline of nickel consumption caused by the cutback on production of stainless steel.
The reason, why stainless steel mills determined to decrease their production of stainless steel, is due to an increase of stainless steel products stocked at their works and in the market and, from this point of time, a substantial quantity of nickel stocks has already indwelt in a supply chain of nickel. It took a certain time that this aspect has arisen through the course of an increase of nickel stocks held by nickel producers as well as an increase of LME nickel stocks, and LME nickel stocks are at last increasing to the figures, which have been actually felt by the market as a reasonable level ( 11,544 tons as of the 22nd of September ). LME nickel stocks are now in the direction to increase further.
Jinchuan Nickel of China announced in mid September to decrease their nickel production in 2005 by 4,000 tons but, in view of the background which the production of stainless steel in China has been maintained on a favorable tone, this announcement has still left an opaque part. There is an opinion in the market that this cutback of 4,000 tons has been affected by an increase of nickel imported into China. However, major stainless steel mills of China ( Shanghai No.1 Iron & Steel Works of Baosteel Group and Taiyuan Iron & Steel ) refused in last week a request placed by outside parties to decrease the production of stainless steel in October - December quarter and this matter has been strongly impressed as Chinese mills are out of the line for cutback of the production being implemented by Asian mills.
LME nickel price at the 23rd of September was US$13,705 per ton ( US$6.216 per lb. ) for three-month futures, which was kept on a level of US$13,000 per ton being stimulated by a higher price of copper, but that in last week had suddenly fallen once by US$2,000 per ton to a lower level than US$13,000 per ton. Stainless steel mills emphasized that LME nickel price averaged for movments in full year of 2004 was US$6.29 per lb. and, therefore, the current price of LME nickel has at last fallen to the averaged level in 2004, which has been still felt as a higher price level for them.
In addition, major trading companies of Japan have taken the offensive to dispose of nickel metal purchased on their account and stocked by them in the Asian market, excluding Japan, and have supposedly succeeded to adjust a certain quantity of their nickel stocks. In view of the fact that specialized stainless steel millls of Japan will decrease their production of stainless steel by a substantial extent of 30 - 35% in October - December quarter, these trading companies have to dispose of their nickel stocks. A favorable tone on requirement of high functional nickel parts has been informed but a depression on sales of normal TV sets has caused to decrease nickel consumption.
South African producers are anxious for an oversupply of ferro-chrome and have been already decreasing their production of charge chrome from July - September quarter of this year. Apart from some companies, major producers of South Africa will continue to decrease their production of charge chrome in October - December quarter. Samancor Chrome already announced that they decrease their production of charge chrome in the second half of 2005 by 150,000 tons in total, consisting of 70,000 tons in July - September quarter and 80,000 tons in October - December quarter, and Xstrata already decreased their output of charge chrome in July - September quarter mainly for a higher fee of electric power in winter time of South Africa.
A decrease of 500,000 tons per annum on production of crude stainless steel is estimated to reduce chrome consumption by 90,000 tons per annum of chrome content ( 180,000 tons on material base ) but it is hardly possible to normalize the supply situation of ferro-chrome only by the cutback in South Africa. The movements on production of high carbon ferro-chrome ( charge chrome ) in India, Kazakhstan and Russia will put hereafter a considerable influence on the market of ferro-chrome.
The negotiations with stainless steel mills of Europe on price of charge chrome for shipments in October - December quarter have now reached a peak and the parties concerned have aimed to settle the matter in this week to next week. Consumers' side asked for a further reduction, following a reduction of 5 US-Cents per lb. settled for July - September quarter, and the main reason pointed out by consumers is a substantial fall of price for spot cargoes of high carbon ferro-chrome. A differential of prices between regular material and spot material is more than 10 US-Cents per lb. and this differential of prices has become a focus on the negotiations.
A weak tone of price for spot cargoes of high carbon ferro-chrome has been caused by an oversupply of this ferro-alloy and some cargoes of Indian high carbon ferro-chrome ( supposedly produced by medium or small companies of India ) are floating on the spot market. This bearish tone of spot price for high carbon ferro-chrome has been influenced by the fact that stainless steel mills have held back to purchase newly this ferro-alloy. A phenomenon, which Indian producers have suffered from an excess of their cargoes, is due to the difficulties to export high carbon ferro-chrome for China as expected. The purchases of high carbon ferro-chrome implemented by major foreign trading companies to relieve an excess of spot cargoes are supposed to be effective.
However, the distressed cargoes of Indian high carbon ferro-chrome are now in the direction to resolve and it seems that spot cargoes of this ferro-alloys offered at a lower price than 60 US-Cents per lb. CIF Japan are now disappearing from the market. However, China has suffered from a large quantity of chrome ore imported and endeavored to digest this excess of chrome ore in the domestic market of China by means of selling in form of ferro-chrome. It is anticipated that China will expand their production of stainless steel in 2005 by 700,000 tons per annum compared with that ( 2,360,000 tons ) produced in 2004. Accordingly, the consumption of ferro-chrome in China has been active and China will import ferro-chrome in the second half of 2005 and afterwards on condition that the prices must be discounted.
|last modified : Fri 30 Sep, 2005 [14:31]|