Figures from the China Stainless Steel Council showed crude stainless steel output rose 3.6% to a new high in 2018. Despite this, stainless steel prices have continued to weaken through January and could slip further in February, according to the latest Stainless Steel Market Tracker from Fastmarkets MB. Prices could rebound somewhat thereafter but it is clear uncertainty surrounding the demand outlook continues dampen any degree of restocking and squeeze stainless steel mill margins.
The underlying fundamentals are likely to remain supportive; the International Nickel Study Group (INSG) forecast the refined nickel market to record a further 33,000-tonne deficit in 2019 after the 123,900-tonne deficit in January-November 2018.
The market continues to assess the knock-on effect of Vale’s tailings dam disaster at its Córrego do Feijão iron ore mine. The group will decommission all of its upstream tailings dams and financial penalties could affect mine investment projects, potentially curtailing Vale’s attempts to boost production by ~28% per year over the medium term from an estimated 244,000 tonnes in 2019
The latest COT data showed net length among LME investment funds increased by 1,074 lots in the week to January 25 - the 525-lots build in fund longs was bolstered by a modest 549-lot reduction in open shorts.
All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.