In the Middle East, there has been an increase in demand for product from downstream industries, such as construction, consumer products, agriculture and processing which are predicted to be major growth drivers for the stainless steel industry. The market is being further propelled by the shift from traditional use in, for example, consumer goods, construction and architecture to extensive use in sectors such as railways and automotive. The growing shift from traditional to newer technologies owing to cost reductions in the steelmaking process and use of more energy-efficient manufacturing processes are expected to aid market growth. Technological advancements to improve efficiency and increase production capacities for attaining lower cycle times in the manufacturing process are further catalysing industry growth.
It has been an extraordinarily volatile year for the nickel market, including some big price swings that were not tied to traditional supply-demand dynamics but rather to the uncertainty surrounding the Ukraine conflict and COVID-related lockdowns in China.
The strong short squeeze on nickel in LME trading has also disrupted the market. Some market participants had been taking a short position in the nickel futures market at a time of high prices, which they believed would subsequently fall and bring them a good return. But when the Ukraine conflict began, nickel prices actually surged. This resulted in extremely expensive margin calls and, in some cases, required companies to buy more nickel contracts to offset their short positions, thus exacerbating an already volatile but upward trend in pricing.
In April, nickel prices stabilized in the US$ 30,000-35,000 per tonne trading range. “But given that its fundamentals have started to look softer than we previously envisaged, we would not be surprised if nickel starts to trade lower,” Fastmarkets noted in its April 26 Base Metals Tracker.
The deteriorating market outlook as a result of inflationary pressures presents substantial downside risks. Elevated energy costs, due in part to the Ukraine conflict, are likely to limit consumer spending; people are already tightening their belts and purchases of new cars and other metal goods have slowed dramatically. This has only just started to be reflected in prices and so the bulls may well have to endure more pain in the short term.