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A seasonal lull in demand in January and stainless steel mills stocking up on raw materials ahead of the Chinese New Year are seen as two major factors for this.
Any possible price rise for stainless steel over the rest of January are likely to be limited given the low buying interest among end-users as well as mills’ stable production costs.
“If Indonesia implements the policy strictly, offers could rise along with the strengthening nickel. But transaction prices won’t be influenced greatly given the low trading volume,” a Wuxi-based distributor said.
The three-month nickel contract on the London Metal Exchange ended the official session at $14,355 per tonne on Tuesday January 14, up 4.6% from $13,725 per tonne on January 10.
The ban went into effect on Sunday January 12.
A rapid pick-up in February is also unlikely as mills would have stocked up ahead of the Chinese New Year.
“Mills usually build up sufficient stockpiles of nickel pig iron (NPI) before the Chinese New Year holiday so that they do not need to worry about their NPI supply in February,” a Wuxi-based analyst said.
“Prices are more likely to remain firm in February because many market participants will be on holiday. We will also adjust our production during the holiday,” an east China-based mill source said.
Effects of the ban are expected to be felt in March.
“High inventory levels of Chinese nickel ore is believed to be softening the impact of the export ban, but this doesn’t mean that everyone has sufficient stock.
“There are still some who will encounter tight nickel ore supply and will be forced to cut output,” the mill source said.
China is believed to have stockpiled nickel ore over the past year in preparation for the much-talked-about ban. The latest estimates put stockpile levels at about 24 million tonnes.
“Only when a shortage of NPI forces mills to control production and lower their utilisation rates will stainless steel prices rebound,” a stainless steel analyst said.
A price rise of about 1,000 yuan ($164) per tonne on benchmark 304 cold rolled coil can be expected in March, market participants said.
It could take more than a month before Indonesia’s ore export ban really impacts the Chinese stainless steel market due to the upcoming Chinese New Year, market participants said.