In the first half of the year, nickel and stainless steel market demand followed up less than expected, and the downward pressure node was earlier than in previous years. In the second half of the year, considering on the one hand the inventory cycle shift support, on the other hand, the nickel supply pressure continues to expand, and the nickel and stainless steel market has a bottom rebound opportunity under the long-short game.
Weak costs weak demand Nickel and stainless steel fell in the first half of the shock
In the first half of the year, China's stainless steel market as a whole showed a shock trend after the fall, and the annual average price center of gravity has moved down.
Reviewing the reasons for the weakening of stainless steel in the first half of the year, the imbalance between supply and demand of the main raw materials nickel led to a continuous decline in the market, and the cost continued to decline with the supply and demand pressure of stainless steel itself, which is the main reason for the gradual decline in the price center of the stainless steel market.
Specifically, there is an imbalance between nickel supply and demand, and the market continues to decline. Overview of the imbalance between supply and demand in the nickel market in the first half of the year intensified, of which the supply side, as a raw material external dependence of more than 80% of the products, from January to May nickel ore imports in 11,947,500 tons, an increase of 1,210,800 tons over the same period last year, the range of 11.27%. The increase in raw material supply is reflected after the market, which evolves into a blowout growth in primary nickel production. According to market research data, primary nickel production in the first half of 2023 was 106,800 tons, an increase of 27,800 tons from the same period last year, an increase of 35.19%.
At the same time, the supply of nickel-iron, the main raw material for stainless steel production, has also increased beyond expectations. Data from the General Administration of Customs show that the total import of nickel-iron from January to May 2023 was 2,921,800 metal tons, an increase of 844,700 metal tons over the same period last year, an increase of 40.67%. Although domestic ferro nickel production declined in the first half of the year, the data show that the final total supply of ferro nickel in the first half of 2023 was 3.1104 million metal tons, an increase of 818,300 metal tons over the same period last year, an increase of 35.70%.
In this context, in the first half of 2023, the domestic nickel market as a whole showed a volatile downward trend, according to the data, from January to June 2023, the average price of domestic 1# nickel was 192962.92 yuan/ton, down 6.02% from the same period last year, June 30, the domestic 1# electrolytic nickel price was 162900 yuan/ton, The price is down 31.00% from the start of the year.
At the same time, the stainless steel market itself in the first half of 2023 also presents a pattern of strong supply and weak demand. Before and after the Spring Festival holiday, the inventory of stainless steel market accumulated significantly, as of the end of February, the inventory of stainless steel was 1,0442,200 tons, up 22.25% from the same period last year. In addition, the rise in production has also significantly enhanced the supply pressure, including stainless steel production in February at 2.3096 million tons, an increase of 11.31% over the same period last year. In addition, the performance of the export market in February and March was also significantly lower than the same period last year, and under the comprehensive impact, the overall supply and demand pressure of stainless steel gradually became prominent, and the negative effect on the price was obvious.
In the second half of the year, the nickel market fatigue is difficult to change the supply and demand side of stainless steel
Looking forward to the second half of the year, the factors affecting the operation of the stainless steel market will be concentrated in several aspects such as macroeconomic and industry cycle fluctuations, cost fluctuations caused by changes in upstream raw materials, and changes in the supply and demand fundamentals of the product itself.
From a macro perspective, the pace of interest rate hikes by the Federal Reserve has stopped slightly in the first half of the year, but at the beginning of the second half of the year, the Federal Reserve official frequently released "hawkish" statements, the market expects that the Federal Reserve still has a greater probability of interest rate hikes in the second half of the year, the industry expects that the U.S. index will continue to run strongly, the non-ferrous metal market is under collective pressure, the bearish nickel market, and the raw material nickel spot market continue to be under pressure. Stainless steel cost pressure is expected to rise accordingly. However, the latest PPI related data continued to rise, and a number of domestic banks lowered interest rates, which boosted the overall domestic consumption and investment confidence, and formed a positive for commodity prices, including steel products.
In addition, the current inventory cycle in China is completing the transition stage from active destocking to passive destocking, which corresponds to the state of recession to recovery in the economic cycle. From the corresponding relationship between cyclical changes and commodity price trends, the rise in prices is often accompanied by passive destocking and active restocking in the inventory cycle. For the overall commodity market, the potential for positive market prices to rise is also supportive for the nickel and stainless steel markets.
However, from the cost side, the primary nickel production capacity continues to be released, and the imbalance between supply and demand remains. At present, the electrodeposition nickel production capacity is expanding rapidly, and the domestic primary nickel supply will maintain an increasing trend in the future, which will form a greater downward pressure on nickel prices. And because the terminal downstream products of nickel appliances, kitchen and other industries accounted for a relatively high export, so in the face of slowing overseas economic growth may lead to weakening external demand, market concerns are more obvious.
In addition to the impact of stainless steel on the nickel market in the traditional consumer field, nickel downstream another key area of new energy power batteries are also facing greater pressure, the pattern of oversupply continues to act on the market, the business mentality appears obvious concerns, the entire market trading activity has declined significantly.
Therefore, in the case that the imbalance between supply and demand in the nickel market is difficult to effectively change, the pressure on the nickel market or continue to drag down the cost of stainless steel, in the case of insufficient impact of other raw materials, the impact from the cost side of the stainless steel market, or still to the negative impact of the main tone.
Look at the supply and demand side of stainless steel itself, on the one hand, stainless steel production capacity continues to increase, and the pressure is slowly released. Stainless steel's own production capacity is still continuing to increase, the domestic stainless steel new production capacity in 2022 accumulated in 6.08 million tons, an increase of 14.36%, the first half of 2023 stainless steel new production capacity is still continuing to increase, with the gradual production of increased capacity and more new production capacity continue to be put into production, the overall supply of stainless steel is expected to continue to increase, increasing the market pressure may. In this long-term process, the pressure on the overall market of stainless steel is slowly released.
Although the output of stainless steel is generally low in the first half of the year, there is a large room for adjustment in the second half of the year. In 2023, the crude steel flat control news is basically determined, from the production of stainless steel, the cumulative production in January-June 2023 is 13.631 million tons, a decrease of 0.79% from 13.739 million tons in the same period last year. In the case of low overall production in the first half of the year, the production of production enterprises in the second half of the year can be adjusted relatively large space.
On the other hand, the special steel actively advocates the Lido stainless steel industry. At present, the development and application of special steel represented by stainless steel in China has always been a positive attitude, and provinces and cities have actively promoted the development of special steel industry, which is mentioned in the "Guiding Opinions on promoting the high-quality development of steel industry". Focus on the development of high-quality special steel, special alloy steel for high-end equipment, steel for core basic parts and other small-batch, multi-variety key steel, and strive to break through about 5 new key steel materials every year to better meet market demand. In addition to the support for steel demand for the normalization of medical and environmental governance in recent years, the overall stainless steel industry continues to benefit.
Under the game of supply and demand, the inventory pressure of stainless steel is not large. With the overall change in supply and demand, the inventory of the stainless steel spot market has shown a more significant decline, at present, the inventory pressure of the second half of the stainless steel spot market is not large, as of the end of June, the national stainless steel inventory is estimated at 816,100 tons, down 4.12% from the same period last year. Therefore, the overall performance of supply and demand fundamentals is relatively more supportive.
Overall, the pace of the Federal Reserve rate hike has slowed down, the domestic economy is in the recovery stage, and under the joint support of active policy advocacy and cycle drive, the overall market expectation is relatively optimistic. In addition, the completion area of the end of the construction brought about by the measures of the real estate industry has continued to rise, which has brought support to the demand for the downstream varieties of stainless steel represented by the home appliance industry, and has relatively little impact on the supply and demand pressure of stainless steel itself, and there is support for the stainless steel market in the second half of the year.
However, considering that nickel supply concerns continue to exist on the one hand, and concerns about weak external demand persist, or drag down the overall market atmosphere.
In summary, it is expected that the nickel and stainless steel market in the second half of 2023 is expected to have stronger space, but there is still pressure in the fourth quarter. It is expected that the nickel price operating range or concentrated in 150000-190,000 yuan/ton, stainless steel price operating range or concentrated in 15000-17500 yuan/ton, according to the seasonal law of judgment, the high probability of the second half of the year in September, low or appear in July, December.
