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Trade Assurance Shandong Jiugang Tisco Steel Co., Ltd.

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The market is heading towards rising energy prices and weakening economic data.

While high energy costs have led to a reduction in capacity and thus supply, weak economic data has led to a decline in demand. The question now is what will prevail and determine the evolution of stainless steel prices in the coming months.
The LMEX, or Industrial Metals Index, fell almost 30% from its all-time high in February and has been fluctuating in a slightly upward trend for a few days now. In steel and other commodities, there is also a bullish rise after the significant price falls of the last few weeks. The massive price rises were associated with the rush to hoard raw materials once the war in Ukraine had begun, and these yields have now been fully realised. Moreover, the latest price reductions would accompany a slowing economy.
However, alongside weakening economic data in the US and Europe, China is now increasingly in the spotlight. Thus, economists at Commerzbank assume that China will only achieve economic growth of 3.5% this year, far below the Chinese government’s expectations. To begin with, this would mean the absence of important impulses to support global demand and, therefore, a rise in prices.
With reference to alloy surcharges, this means that alloy surcharges should fall for the fifth consecutive month.

Nickel prices fluctuated between $19,000 and $24,000 during the last two months, stabilising again quickly after large swings. Seen in this light, we can speak of a sideways movement (i.e. little change) at a high and volatile level.
According to the INSG (International Nickel Study Group), the nickel market was oversupplied by almost 30,000 tonnes during the first six months. This is due, in particular, to increased supply, especially in Indonesia, and is also indirectly reflected in the stock levels on the LME. Currently, there are almost 55,000 tonnes in London.

Industrial metals are currently heading for a bottom. The economic slowdown has been partly factored into current prices. The strong dollar continued to support alloy surcharges over the past months, despite significant falls. This momentum should gradually diminish in the coming months and quarters. Therefore, we expect a sideways, little changed movement of alloy surcharges for all commodities in the last quarter at a very volatile level. In our view, the potential/risk for prices to rise is much lower than for them to fall. This means, on the contrary, that a further reduction of alloy surcharges is more likely than a rise.



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