Manufacturing activities across nickel downstream sectors retreated to contraction in February

SHANGHAI, Mar 2 (SMM)—Manufacturing activities across nickel downstream sectors in China retreated to the contractionary territory in February. 

SMM data showed that the purchasing manager's index (PMI) for downstream nickel industries, including stainless steel, electroplating, alloy and battery, stood at 46.93 in February, down 3.68 points from January. A reading below 50 indicates contraction.

• Production sub-index extended declines due to the CNY holiday

The composite sub-index for production in February lost 1.69 points from January to 44.17 in February, staying in contraction. The production sub-index in the stainless steel sector dropped 1.14 points on the month to 44.1, as some mills conducted maintenance or reduced output during the Chinese New Year (CNY) holiday. But most of the large-scale stainless steel mills did not cut output sharply as decent profits and sufficient orders prompted them to produce efficiently. The production sub-index in the electroplating sector stood at 41.34. Many small and medium-scale electroplating plants were closed during the holiday, while several large-scale plants operated normally.

• New orders sub-index remained in contraction in February

The overall sub-index for new orders in February declined 4.33 points on the month to 45.5 in February, remaining in contraction. The new orders sub-index in the stainless steel sector came in at 45.24. Compared with previous years, operations at Chinese stainless steel makers were less affected by the CNY holidays this year as workers were encouraged to stay at their workplaces for the holidays in order to reduce the possibility of being infected with COVID-19. In addition, foreign orders were also robust. In the alloy sector, the new orders sub-index stood at 47.21.

• Raw materials inventory sub-index retreated to contraction as downstream users consumed less feedstock during CNY

The overall sub-index for raw materials inventories plunged by 20.24 points from December to 46.83 in February. The raw materials inventory sub-index in the stainless steel sector stood at 46.19. In terms of nickel raw materials procurement, stainless steel plants in February were more active than expected due to decent profits and expectations that high-grade NPI prices were likely to rise further. However, some steel mills reduced utilisation of high-grade NPI after they increased the proportion of stainless steel scrap. The sub-index for raw materials inventory slumped by 19.22 points month on month to 49.57 in February in the battery sector. Tight supply and high demand kept feedstock prices at high levels, which made downstream buyers cautious about purchasing.

• Finished goods inventory sub-index fell to the contractionary territory

The overall sub-index for finished goods inventory fell 18.07 points on the month to 48.55 in February, retreating to contraction. The sub-index for finished goods inventory declined 20.38 points from January to 48.67 in February in the stainless steel sector. Trades almost halted during the CNY holiday while stainless steel mills operated normally.