The past week has witnessed Chinese steel futures surged more than 6% to a record high on strong consumption and raw material supply crunch, while concerns over output cut in the steel sector also supported prices.
Shanghai steel futures recovered to above 5,400 yuan a tonne, the highest since May 18th after latest data showed China’s crude steel output rose by 11.8% from a year earlier in the first half of the year. China pledged to limit crude steel output in 2021 at no higher than the 1.065 billion tonnes it made last year but at the half-way stage of the year, the country has already produced 563.33 million tonnes of the metal. Considering only June, production went up 1.5% year-on-year but declined 5.6% from a record level in May as government environmental controls ahead of the Communist Party’s centenary celebrations in July constrained production. The steel market has been under pressure due to China’s efforts to limit soaring commodity prices after cost of steel rallied to an all-time high of 5,975 yuan per tonne on May 11th.
The rising price of nickel could be behind this. ShFE nickel inventories were last at 7,555 tonnes, down 58% year-to-date and tumbling 74% from the same time last year.
China’s nickel cathode output fell 4.4% year-on-year to 79,400 tonnes in January-June, state-backed research house Antaike said, adding, output in the second half was expected to reach 88,000 tonnes.
Nickel prices hit a nearly five-month high on Friday, tracking strong gains in stainless steel, buoyed by strong demand for the metal with supplies running low.
Three-month nickel on the London Metal Exchange rose as much as 2.3% to hit its highest since Feb. 25 of $19,205 a tonne.
The most-traded August nickel contract on the Shanghai Futures Exchange climbed as much as 3.6% to 143,710 yuan ($22,224.46) a tonne, its highest since Feb. 26.
While nickel demand for electric vehicle batteries is forecast to climb in the coming years, stainless steel still accounts for the bulk of the metal’s consumption.
On the supply-side, the restriction of the power supply and governmental control of production mainly because of the carbon emission control target also contribute to the uncertainty of the steel price for the long run.
This summer, stainless steel could hardly stay “cool”.
Post time: Jul-19-2021