Downstream nickel PMI contracts for 3rd straight month in Jan

SHANGHAI, Feb 1 (SMM) – The purchasing managers' index (PMI) for the downstream nickel industries dropped 1.14 from December to 45.76 in January, below 50 for the third consecutive month, showed SMM data. A reading below 50 indicates contraction. 

The sub-index for production increased 1.27 on the month and came in at 41.46, pulled by the downstream stainless steel and alloy sectors as consumers restocked ahead of CNY. However, environmental rectification works in Jiangsu and Hunan provinces, as well as earlier breaks in the southern electroplating plants, lowered production in the electroplating industry. This kept the overall sub-index for production below 50 in January. 

Weak orders in the stainless steel, electroplating, and battery sectors dragged the sub-index for new orders by 4.71 on the month, to 40.08 in January. The CNY factor was the major cause.    

The sub-index for raw materials inventory nudged up 0.15 from December to 72.24 in January, as steel mills stockpiled raw materials such as refined nickel for the holiday. This was reflected by a high index for raw materials inventory in the stainless steel sector, at 74.4 for January. Rising prices of nickel kept those steel plants restocked as needed last month.

Accumulated in-plant inventories at battery producers raised the sub-index for finished product inventory by 2.38 month on month, to 45.22 in January. 

For February, the preliminary PMI for downstream nickel industries stood at 42.28, down 3.48 from January, SMM survey showed.

Stainless steel

In the stainless steel sector, all the sub-indexes, except for purchasing price index, remained flat from December and this resulted in little changes in the comprehensive PMI for the industry, standing at 47.21 for January. The sub-index for purchasing price surged 61.15 on the month to 77.58, bolstered by rising prices of nickel. 

Some steel mills underwent maintenance from mid-January, and this kept the production sub-index below 50 in January, at 43.3. Overselling at a southern steel mill grew the backlogged order index, by 16.74 from December to 66.74. 

The preliminary PMI for the stainless steel industry in February shrank to 40.9 as accumulated inventories of finished products will affect production. Market participants mostly took a moderate to a bullish outlook on nickel prices after the holiday, and this supported the preliminary sub-index for purchasing price above 50 in February. 

Electroplating

The PMI for electroplating industry declined from December as expected, to 22.78, as CNY breaks and environmental rectification weighed on new orders and production.

The preliminary PMI in February for the industry was 50, with sub-indexes for production and new orders standing both at 50, as producers' rectification works approach the end. 

Alloy

Across alloys, the PMI for January climbed 7.39 from December to 50, beating expectations. Higher index for purchasing volume accounted for the increase, as some alloy plants operated in high gears to fulfil orders in advance before CNY. 

Soaring prices of raw materials bolstered the purchasing price index by 94.02 month on month, to 97.13. Downstream demand from industries of rail transportation, military, and chemicals maintained stable, but demand from containers weakened. 

The alloy industry's preliminary PMI in February came in at 46.85, down 3.15 from January, as extended breaks at some alloy producers may lower production by 30% on the month. This is forecasted to lower both indexes for production and new orders by 5.73 from January to 44.27. 

Battery

The PMI for the battery industry in January lost 5.43, and stood at 44.51, compared with the expected 51.39. Smaller orders from the traditional nickel-hydrogen battery sector dragged the sub-index for new orders sharply by 18.7, and this led to the lower PMI. The preliminary PMI for the battery industry will nudge up to 50.43 in February, on the expectations of improved demand after the holiday. 

For other downstream industries, the PMI registered 45.88 in January, up 2.19 on the month, and higher than the expected 45.55. While the production index went up some 6.85, overall weak demand kept the sub-index for new orders at 34.02 in January. For February, the PMI across other industries will inch up but remain below 50, at 46.69.