Recent increases in Chinese demand for seaborne scrap have not proved the game-changing event for prices as was thought possible this year. We expect Chinese demand to increase slightly next year, as Chinese NPI prices increase on the back of tightening fundamentals (see Alloy highlights section). This will increase the competitiveness of seaborne stainless scrap to some degree but will not prove as crucial as the LME nickel price trajectory. MBR expects improved scrap demand from higher purchasing in the USA and Europe next quarter (as stainless output typically increases q-o-q in Q1), though weakness in US stainless prices could persist, partly due to pressure from cheaper imports. This in turn could lead to a further tightening in the gap between EU and US scrap prices, as US mills hold relatively firm on keeping costs down. Nickel discounts (off LME benchmarks) will likely decline in the first quarter, even if recent LME nickel price rises fade, as we expect the improvement in purchasing by mills to remove some of the pressure on scrap suppliers to price their material solely on nickel movements.
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