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Scarcity Of Actual Cargoes On Supply Of Stainless Scrap Causes To Restrain Purchases At High Prices
= Stainless Steel Mills Intend To Purchase Stainless Scrap Mainly At Yen 165,000 / Ton
LME nickel prices at the 3rd of August were <> US$18,580 per ton (US$8.43 per lb.) for cash and <> US$18,700 per ton (US$8.48 per lb.) for three-month futures, having recorded the highest ones since the beginning of 2009, but the domestic price of nickel-based stainless steel scrap (new clippings) in Japan has taken an unexpectedly calm reaction to this rise of LME nickel prices.

Stainless steel mills in Japan have currently intended to purchase nickel-based stainless steel scrap in the price range of Yen 163,000 to 165,000 per metric ton delivered to mills and major mills are prepared to pay Yen 165,000 per ton for their purchase of this scrap. The price (ex. yard) of nickel-based stainless steel scrap to be paid by dealers for their collection is in the mood to be risen further but, in view of the situation which actual cargoes have been extremely limited, the price of this scrap to be paid for collection has still remained on the level of Yen 165,000 per ton. Even if dealers could have proposed a higher price, the quantity to be able to collect has been limited and a rare phenomenon has arisen in the market of stainless steel scrap.

The production of stainless steel products in Japan has strengthened a reduction from the beginning of 2009 and the stainless steel industry of Japan produced 372,000 tons of stainless steel products (including 234,000 tons of nickel-based products) in January - March quarter of 2009, which had a considerable decrease of 56.5% as a whole compared with that in the same quarter of 2008 and also decreased by 37% only for nickel-based stainless steel products. This large reduction in production of stainless steel has caused to decrease the quantity of stainless steel scrap to be generated in Japan and this aspect has come up to the surface at present.

The current price of Yen 165,000 per ton for nickel-based stainless steel scrap corresponds to US$6.35 per lb. of Ni, which is equivalent to 75.3% of LME nickel price and, in case of Yen 170,000 per ton, this Yen price corresponds to US$6.63 per lb. of Ni, which is equivalent to 78.6% of LME nickel price. The reason, why stainless steel mills pay Yen 165,000 per ton as the maximum, is due to the fact that this Yen price is the nearest one to price of nickel metal. When stainless steel mills pay Yen 170,000 per ton for purchase of nickel-based stainless steel scrap, this Yen price is equivalent to 78.6% of LME nickel price by a further raise and a merit to use this scrap will lower.

However, in order to cope with a favorable tone on exports of ferro-nickel from Japan to China as seen since the beginning of this year, ferro-nickel producers in Japan have already concluded the contracts on exports of ferro-nickel for shipments in October - December quarter of 2009 as seen in many cases. Therefore, the margin to enable stainless steel mills to substitute ferro-nickel for a shortage of nickel-based stainless steel scrap is thought to have been fairly restricted. In view of the matters which electric furnaces to be operated have been limited and nickel ore as raw material has become insufficient, these Japanese producers have to produce ferro-nickel on a scale of 11,000 - 12,000 tons per quarter of nickel in ferro-nickel. Japan has been exporting more than 50 - 60% of the quantity of ferro-nickel to be produced.

Therefore, it is supposed that, in anticipation of the worst case, some of stainless steel companies in Japan have already determined to use nickel metal if it is necessary. The trigger, which has tightened on supply of nickel unit, is that stainless steel mills have decided to shift their production activity to a nearly full scale from July. The large quantity of ferro-chrome stocked at warehouses in wharves of Kawasaki port is being reduced considerably and this movement is an evidence, which stainless steel mills have inclined to use nickel metal.
last modified : Mon 10 Aug, 2009 [10:42]
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