SHANGHAI, Jul 2 (SMM) – The discount of high-grade nickel pig iron (NPI) to nickel plate prices is likely to narrow to 56 yuan/mtu in July as stainless steel producers are usually keen to make large purchases at the beginning of the month, SMM believes.
As of the end of June, the discount stood at 80 yuan/mtu, according to SMM assessments. We expect it to narrow to the average level seen in May at 56 yuan/mtu in July.
While supply shortage over the past month due to environmental checks supported the prices of high-grade NPI, it failed to bring a surge as stainless steel scrap proved to be a worthy competitor.
The government’s crackdown on induction furnaces in Dainan town in Jiangsu province from the end of May generated an incremental inflow of some 60,000 mt of #300 stainless steel scrap into the market, equating to 4,800 mt in nickel content. Some stainless steel mills increased their use of scrap due to the relatively low price and ample supply.
However, we expect stainless steel scrap unlikely to further squeeze high-grade NPI in July as consumers’ worries over the quality of stainless steel grew. Transportation costs of scrap also limited its price advantage.
High-grade NPI output shrank some 3,470 mt in nickel content from a month ago in June due to the month-long environmental reviews across China. The cut in output accounted for 14% of the overall output in May.
Production in major high-grade NPI producing areas including Inner Mongolia, Jiangsu and Hebei provinces all took a hit. Output across these regions accounted for over 45% of the overall output in May.
The Shanghai Cooperation Organisation (SCO) summit in Qingdao during June 9-10 also affected production in Shandong area, where output accounted for 30% of the overall supply in May.