The decline in global stainless scrap prices through October (month-on-month) has been the sharpest since at least mid-2012. This large downward shift has largely followed the sharp decline in LME nickel prices, which have fallen back to levels last seen in early March, as upstream nickel supply from elsewhere has substituted the decline in Indonesian nickel ore availability. But, as mentioned last month in this tracker, neither LME refined nickel nor stainless scrap outside of China have benefitted in the form of increased demand, as Chinese nickel requirements are being amply filled instead by increased imports of nickel ore from the Philippines and ferro-nickel from elsewhere (e.g. Colombia). Interestingly, the scrap price has in fact fallen faster than the nickel price, illustrated in the widening gap between the scrap price in the EU/UK/US versus the cost of its constituent primary raw materials (drawn mainly from the nickel price), commonly known as the scrap discount rate (see chart below). MBR understands this is due to an additional downside factor in the shape of poorer purchasing activity among European mills, which we believe will likely persist until the end of 2014.
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