SHANGHAI, Dec 3 (SMM) – Manufacturing activities across nickel downstream sectors in China weakened as expected in November and remained in contraction for the eighth consecutive month, weighed by production cuts of stainless steel and continued sluggish demand from electric vehicles, according to SMM survey.
SMM data showed that the purchasing managers' index (PMI) for downstream nickel industries, including stainless steel, galvanising, alloy, and battery, stood at 45.74 in November, down 3.57 from October. A reading below 50 indicates contraction.
For December, prospects of lingering weakness in the nickel downstream sectors sent the preliminary PMI to 45.34, down 0.41 from November, SMM assessed.
The sub-index for production failed to meet the expected 50.04, standing at 41.44 for November, down 7.34 from a month ago as stainless steel producers implemented output cuts in a falling market.
Operation at battery plants also slowed significantly as demand remained lacklustre from the new energy vehicle sector.
Other nickel downstream industries, meanwhile, saw the sub-index for production swinging back to expansion as nickel wire, mesh producers and printing plants resumed normal operation after National holiday in October.
Supply glut of stainless steel, together with overall consumption weakness in the fourth quarter and tight cash flow at year-end, depressed new orders for stainless steel and batteries in November.
According to SMM data, the overall sub-index for new orders across downstream nickel sectors stood at 43.22 last month, down 6.04 from October, and missing expectations of 49.97.
The overall sub-index for raw materials stocks recovered marginally from a month ago, but remained below the growth-contraction threshold, standing at 48.25 in November.
Stainless steel producers have prepared sufficient stockpiles of feedstock, and squeezed margins drove them to slow procuring. Some producers that previously purchased feedstock at high prices started to renegotiate prices with suppliers.
The overall sub-index for finished products inventories remained in expansion territory at 50.05 in November, due to on an absence of a pickup in downstream demand.
SMM expects the destocking progress in the stainless steel industry to remain slow in December.
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