Nickel soaring, LME influence and too little liquidity
Nickel soaring, LME influence and too little liquidity

17 November 2022 – A lot of volatility in nickel contracts after they had recently risen by almost 40%. Was the lack of liquidity on the LME market to blame? Or the LME itself? Emptying stainless steel stocks in China, strong ferronickel and NPI demand and lack of supply are driving prices. Scrap in short supply in Italy, prices rise. And is Outokumpu possibly planning a takeover?

Nickel soaring, LME influence and too little liquidity

After the high flight of nickel contracts on the European LME, nickel fell back by about 9% yesterday. Considering that the price has risen by 35 to 40% within two weeks, this is still manageable.

Nickel under observation?

According to rumours and other media, the setback was caused by various factors. On the one hand, the LME is said to have announced that it wants to take a closer look at the price development. On the other hand, traders complain that the high volatility in nickel was triggered by the lowest liquidity in trading since March 2022.

SHFE hardly reacts at all

Looking at the Asian SHFE and the nickel trade there, there seems to be some truth to the traders’ opinion. The reaction to the development on the LME was hardly significant in Shanghai with a minus of approx. 2.4%.

LME still a global trading centre?

In our eyes, this shows once again that the prices on the LME should now be treated with greater caution. Even if they are trying to ensure the representation of a global market with controversial decisions, such as not banning Russian raw materials from the European trading centre.

Ferronickel and nickel pig iron still in short supply

Due to high demand and emptying stocks of stainless steel in China after the National Day holiday and increasing demand among Chinese stainless steel producers for ferronickel and NPI products, prices there have risen significantly.

Continued strong demand meets undersupply

At the same time, the supply situation for ferronickel and NPI is currently poor, especially from Indonesia. Concerns about a new Indonesian export tax are underpinning the solid price development for these nickel products at present.

Scrap availability much tighter, prices rising

As already reported several times, scrap prices have risen significantly. In Italy, an unsurprising undersupply of scrap is currently being met by increased demand. In view of the fact that European steel and stainless steel producers had cut production by more than 50% in some cases due to high energy costs, this is hardly surprising.

Energy costs fall, scrap prices rise

The price of scrap on the commodity exchanges had also recovered and risen in recent days. Energy costs in Europe, which have fallen to their lowest level since June 2022, make it much more attractive for EAF steelmakers in particular to restart production and further fuel demand for scrap.

Is Outokumpu preparing takeover?

Already in July 2022, the European stainless steel giant Outokumpu announced that it would sell part of its stainless steel production to the Italian group Marcegaglia. Now, according to current reports, the Finnish group is also selling the Argentinean company Fortinox to Mirgor, which specialises in consumer electronics and automotive parts. In October, Outokumpu also divested service centres in the Netherlands and Italy.

Concentration on core business or preparation for takeover?

Outokumpu says it wants to concentrate on its high-value business with flat-rolled stainless steel products. According to speculation, however, this could also be preparation for a takeover, e.g. of a European competitor. In the run-up to the takeover, the company wants to avoid possible objections from the EU competition authorities by divesting parts of the company that could stand in the way. Perhaps Outokumpu is reaching for the ailing stainless steel producer Aperam? It remains speculative.

Latest news

Receive all the latest news once a week

Receive all the latest news once a week

Make it easy for yourself: we will remind you once a week about the latest news.

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!