SHANGHAI, Jan 6 (SMM) – Manufacturing activities across nickel downstream sectors in China recovered from a month ago in December but remained in contraction for the ninth consecutive month, 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 49.51 in December, up 3.76 from November. A reading below 50 indicates contraction.

For January, prospects for lingering weakness in the nickel downstream sectors sent the preliminary PMI to 47.06, down 2.45 from December, SMM assessed.

Last month, the sub-index for production held up better than expected, standing 4.5 higher from a month earlier at 45.94, driven by ramped-up production of #300 stainless steel as orders improved at major producers after their output cuts in November. 

Prices of nickel and stainless steel stabilised in December after previous losses, prompting traders and downstream buyers to resume purchasing. This lifted the sub-index for new orders in the stainless steel sector to 52.36, up 10.71 from the finalised reading in November. 

According to SMM data, the overall sub-index for new orders across downstream nickel sectors was also in expansion territory, up 7.95 on the month to 51.17, beating expectations of 41.04.

The overall sub-index for raw materials inventories rebounded significantly from 48.25 in November, to 55.65 in December, as stainless steel producers stockpiled actively on falling feedstock prices. 

Downstream galvanising plants also reported elevated raw materials stocks on the back of frontloading demand before the Chinese New Year holiday. Battery producers also stepped up purchasing feedstock for production during the holiday. 

The overall sub-index for finished products stocks, however, flipped to a contraction in December, standing 2.32 lower from a month ago at 47.74. 

Cash-in inclination at year-end pushed stainless steel producers to clear inventories. This, coupled with a pickup in downstream procurement, accounted for the decline in finished products inventories.