Cheaper nickel to aid stainless steel firms

Large Indian stainless steel manufacturers such as Jindal Stainless are expected to see an improvement in their operating profit margins due to a 48 per cent drop in prices of nickel, the key input, on the LME over the last four months.

The non-ferrous metal's price has dropped sharply from its peak in mid-May, largely due to the global stainless steel production showing signs of slowing down.

In addition, London-based Natixis Commodity Market has recently highlighted that the global nickel market is expected to be in a surplus of 5,000 tonnes in CY07 due to a 5 per cent rise in global supplies. For CY08, the foreign brokerage house has predicted that the global surplus would rise to 15,000 tonnes.

Nickel, which was trading around $54,200 on the LME in mid-May, has crashed to $28,000 a tonne currently. Analysts also highlight that prices of the non-ferrous metal are expected to remain weak in the medium term, given the change in the supply-demand situation.

In a recent report, MEPS International, a steel sector consultancy firm, has highlighted that the global stainless steel output, excluding the Chinese production, is expected to decline by 5.3 per cent y-o-y in CY07.

The firm added that if the Chinese production was included, the total global stainless steel output was expected to reach 29 million tonnes in CY07 this year, an increase of 2.2 per cent y-o-y.

Owing to surging nickel prices earlier, large Indian stainless steel manufacturers such as Jindal Stainless have been increasingly focusing on low-nickel stainless steel grades.