15 September 2023 – Asian raw material prices continued to develop positively on Friday, closing in part significantly higher. Chinese stainless steel prices rose. And the LME is once again trying to be more transparent.
Asian raw material prices continue to rise
The Asian raw material prices have continued their positive trend on Friday. The SHFE nickel rises by almost 1.2%, and the Chinese spot prices by about 1%. The stainless steel futures increase by about 0.7%, aluminum by about 0.6% and copper by about 0.8%. Iron ore jumps 2.3%, followed by Metallurgical Coke up about 2.1%. HRC futures rise nearly 1%.
Chinese stainless steel prices up
Reports from the Chinese stainless steel spot markets are that prices for 304 rose again on Friday. Also, producers in Asia do not see any room for price reductions at the moment, as raw material costs and production costs remain at high levels. For example, stainless steel scrap prices in Asia had been rising steadily since the beginning of August and nickel pig iron had increased by more than 7% in the same period.
LME to introduce new pricing mechanisms
The London Metal Exchange (LME) has been trying to improve its image and regain trust in the market since the nickel scandal broke in March 2022. The recently announced move to switch closing prices for aluminum, copper, zinc, lead and nickel to volume-weighted average prices (VWAP) from January 2024 could help increase transparency and standardization.
Nickel switchover not until March 2024?
However, why the LME wants to start switching to VWAP for aluminum and lead in January, and not follow copper, zinc and nickel until March 2024, is unlikely to be particularly helpful in regaining confidence. Nickel in particular saw the most frequent spikes, based on speculation by traders like Big Short, in the first three months.
But the LME, according to its implementation approach, wants to take into account “…the feedback from some respondents that a phased implementation would support market participants in preparing for the change…”.
Thorsten Gerber, CEO of Gerber Group, was amused today and said: “I almost laughed my head off at the idea of LME and more transparency. It’s more likely that the German Chancellor will remember the details of the CumEx scandal.”
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