SHANGHAI, Jan 5 (SMM)—Manufacturing activities across nickel downstream sectors in China returned to expansion in December, according to SMM survey. 

SMM data showed that the purchasing manager's index (PMI) for downstream nickel industries, including stainless steel, electroplating, alloy and battery, stood at 51.11 in December, up 1.55 points from November. A reading above 50 indicates expansion, while a reading below 50 indicates contraction.

Production sub-index increased but remained below 50, output of #300 stainless steel fell slightly on the month in December

The composite sub-index for production in December gained 2.31 points from November to 49.79 in December, staying in contraction. The production sub-index in the stainless steel sector rose 3.35 points month on month to 49.07, remaining in contraction, as some steel makers cut output due to restrictions on electricity consumption, environmental concerns or poor profits. The production sub-index in the alloy sector came in at 49.04 in December, as some producers in north China suspended production for a short time on environmental concerns.

New orders sub-index stayed above 50, orders were robust in the battery and electroplating sectors

The overall sub-index for new orders in December rose slightly by 0.11 point month on month to 50.72 in December. The new orders sub-index in the stainless steel sector stood at 50, unchanged from November. Consumption of stainless steel is expected to improve in January as downstream users will stockpile before the Chinese New Year holiday, which falls around mid-February this year. The sub-index for new orders in the electroplating sector came in at 53.24 in December, a traditional high season. Robust orders prompted many small and medium-scale plants to resume production, while large-scale producers kept stable operating rates. The new orders sub-index in the battery sector stood at 60.36, as downstream users have started to stockpile for the upcoming Chinese New Year holiday.

Raw materials inventory sub-index remained in contraction, stainless steel makers that cut output previously held relatively high inventories of raw materials

The composite sub-index for raw materials inventory in December gained 0.77 point month on month to 49.56, staying in contraction. The sub-index for feedstock inventory in the stainless steel sector lost 0.95 point from November to 47.14. Some steel makers kept relatively high inventories of raw materials as they had reduced production of #300 stainless steel previously. The raw material inventory sub-index in the electroplating sector rose to 54.58 in December, as some electroplating plants restocked raw materials as large amounts of seaborne electroplating nickel, which is more economical than domestic brands, flowed into the spot market.

Finished goods inventory sub-index continued to improve in December

The overall sub-index for finished products stocks jumped 12.64 points on the month to 62.64 in December.  The sub-index for the stainless steel sector increased by 15.24 points month on month to 65.24, as trades improved after stainless steel prices declined.