SMM Nickel PMI Drops to 43.61% in October, and to Keep Falling in November’s Preliminary Reading

SHANGHAI, Oct. 31 (SMM) – SMM survey finds that nickel purchase managers’ index (PMI) was 43.61% in October. The reading was better than forecast, but was lower than the level seen in September. Demand from all downstream sectors, except battery market, was weak over the month. 

Nickel PMI in October

By sub-indicator

Production Weakens

The composite production index was 43.97% in October, down from September’s, and falling into contraction territory. This was due mainly to environmental factor and waning end-users demand. Production in stainless steel and alloy sectors was hit the most, but battery sector outperformed others, and electroplating market kept improving since high temperatures eased from September.

Orders Keep Falling

In October, the composite new order index was 32.02%, down further on a monthly basis. Orders at stainless steel mills kept falling, and the new order index in electroplating sector, which was in expansion territory in September, headed to contraction in October. Orders in battery sector improved from August, and the positive trend was continuing into October.

Finished Goods Inventories Grow

The composite finished goods inventory index grew slightly on a monthly basis to 53.53% in October. Downstream buying interest reduced with finished goods price rising, growing inventories.

Nickel PMI by Downstream Industry

October Nickel PMI by Sub-indicator and Sector 

Source: SMM

Stainless Steel Industry

Stainless Steel PMI was 41.47% in October, better than market forecast of 36.37%, but down 2.79 percentage points from September’s. The decline was mainly dragged down by low readings of production, new orders and raw material inventory. Output at stainless steel mills fell back from highs in October due to falling orders and price declines of stainless steel products, so raw material purchases fell. The finished goods inventory index was 54.27% in October, up 2.64% from September’s as sales reduced.

Stainless steel preliminary composite PMI is expected at 41.28% in November, down from October’s, citing weaker orders and output declines.

Electroplating Industry

Electroplating PMI was 53.07% in October, down 2.27 percentage points MoM. Environmental protection inspections in the electroplating industry normalized, with regular inspections in every month. Some producers said that orders reduced from the previous level. Some producers purchased nickel before the 2017 Chinese National Day holiday, and refined nickel price traded lower after the holiday from September’s, and retreated in late month, and the unclear price trend grew market wait-and-see attitude. Hence, electroplating producers made limited raw material purchases and reduced on-hand inventories in October.

Electroplating preliminary composite PMI is expected at 48.61% in November, as some producers will scale back production due to expectations over weak orders.

Alloy Industry

Alloy PMI was 44.4% in October, below market estimation of 45.1%, and off 7.7% MoM. In October, alloy producers largely maintained normal production, but those in Beijing and nearby regions cut production for environmental factor. Some alloy producers also reduced raw material purchases in October after stockpiling before the 2017 National Day holiday. Orders at military enterprises changed little. 

Alloy preliminary composite PMI is expected at 35.8% in November, down from October’s. Production at alloy plants using blast furnaces in nearby regions of Beijing will be still affected by local government’s efforts in air quality improvement. Meanwhile, a small number of large alloy plants will conduct regular unit maintenance in November. In addition, sales at alloy producers reduced after price gains.

Battery Industry

Battery PMI was 65.29% in October, up 3.72 percentage points MoM, but lower than market forecast of 66.94%. Battery producers generally ran stably in October, and some producers increased production to meet some clients’ orders for 2018. Moreover, a small number of producers grew production after returning online in October. 

Battery preliminary composite PMI is expected at 58.08% in November, staying above 50, but down from October’s. Output at a small number of battery plants is not expected to grow for output restriction measures in winter months, but some will keep increasing output. As a whole, utilization rates at battery producers are expected to slow down.

Other Industries

PMI in other nickel downstream sectors was 50.43% in October, up 4.16 percentage points from September’s. Production at other nickel downstream producers increased in October in Wuxi after environmental protection inspections in September, sending up the composite PMI index above 50.43% over the month. 

The other sectors’ preliminary composite PMI is expected to stay above 50 in November, with the reading at 50.09%. After the 19^th CPC National Congress, some producers turned optimistic over the outlook, and they will likely enter the market for raw material purchases in November.

Nickel PMI Forecast for November

SMM Nickel preliminary PMI is expected at 42.44% in November, down from October’s 43.61%.

November Nickel PMI by Sub-indicator and Sector (Preliminary Data)

Source: SMM

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