Downstream nickel PMI to continue to expand in Aug

SHANGHAI, Aug 1 (SMM) – The preliminary purchasing managers’ index (PMI) for August is expected to stand at 51.76 and to continue to grow, despite a decline of 4.6 points from July. The final PMI for July came in at 56.36, SMM data showed.

Output recovery in stainless steel buoyed the composite production index by 34.07 points to 61.33 in July. The production index in this sector jumped 41.93 percentage points in July on a monthly basis after as the environmental developments eased.

The composite index for outstanding business fell 9.22 points month on month to 52.07 in July, as production of stainless steel increased. The composite purchasing volume index came in at 53.78 in July, up 13.33 points on the month.

The stainless steel PMI stood higher at 57.86 in July, driven by strong indices for production, new orders and inventories of raw materials. The production index jumped from 22.72 in June to 64.65 in July as the end of maintenance and the easing of the environmental factor fuelled production. New orders increased along with production over the month, with the index for new orders standing at 62.2.

High temperatures affected the market for #200 stainless steel, and this grew inventories of finished products. After domestic nickel prices fell below 110,000 yuan/mt, some stainless steel mills replenished goods and this drove the index for raw material inventories up to 58.36 in July. The preliminary PMI for stainless steel is estimated at 52.07 in August, down from July. The production index is likely to fall to 52.48 in August, as non-integrated RKEF + #304 mills planned for unit maintenance in late August-early September amid slim profit margins. Integrated RKEF + #304 mills will grow production given moderate margins.

The electroplating PMI registered higher at 42.8 in July, but fell below market estimates as production was poor and orders backlogged. Environmental reviews, such as those in Hunan, and hotter weather lowered the production index to 34.15 over the month. The two factors also grew the index for outstanding business by 17 month on month. Preliminary PMI for the sector is likely to increase to 46.45 in August, as the environmental factor eases. 

The alloy PMI fell 2.42 points from June to 55.88 in July. As environmental checks in Hebei and Jiangsu limited output recovery, the production index stood at 60.86, down 1.8 points on the month. Lower production and fewer new orders reduced the index for purchasing volume index to 57.68, down 14.69 points from June. The index for finished goods inventories dipped 0.64 points month on month to 49.7 in July. Orders from the petrochemical and container sectors were decent, and those from nuclear power plants held stable over the month. The preliminary PMI for the sector is expected to register at 45.68 in August, down 10.2 points from July. Some producers will close in light of the hot weather, and this will reduce the production index to 30.75 in August. The inventory index for raw materials is likely to add 1.05 points. Falling orders will lower the index for purchasing volumes from 55.88 in July to 45.68 in August.

The PMI for batteries gained 4.5 points on the month to 49.72 in July, but remained below the estimated 51.71. The index for purchasing price tumbled to 28.52 over the month as prices of nickel and nickel sulphate weakened. A lack of confidence in the market depressed interest in production and stocks replenishment and weighed indices for production and finished goods inventories to 45.74 and 41.88, respectively.

Environmental concerns reduced the output of nickel-hydrogen batteries in July. Preliminary PMI for the sector is likely to rise to 50.05 in August, buoyed by demand improvement and higher production and sales of batteries after environmental checks end. 

The PMI for other downstream nickel sectors grew 5.92 points on the month to 50.92 in July, but remained below the estimated 55.53.

Nickel wire and mesh saw brisk orders, and this grew the indices for new orders and raw material inventories to 52.39 and 79.91, respectively. Environmental probes affected the production index to stand at 42.69 in July, and drove up the index for outstanding business to 79.91.

Production and new orders will pick up in August after environmental probes end, and this will drive up the preliminary PMI for other sectors to 70.49.

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