Quarterly Report – July 2020

The LME nickel cash average climbed from US$ 11,750 per tonne in April to US$ 12,125 in May before rising to US$ 12,700 in June, thus giving a second quarter average of US$ 12,270. So while nickel has made gains from its early-quarter lows, where has this optimism come from? 

Demand for stainless steel improved towards the end of the second quarter but is still very weak. The oil and gas sector remains subdued and aerospace is still in freefall from the effects of COVID-19. Australia’s Department of Industry, Innovation and Science is projecting a nickel surplus of around 43,000 tonnes for 2020.

Boeing is forging ahead with its trials of the 737 MAX. For the first seven months of 2020, the company has received order cancellations amounting to 462 aircraft, but this figure needs to be viewed against the projected 3800 on back order. Boeing has resumed production, albeit at a slower pace to try and bolster its supply chain. Airbus seems to be faring somewhat better even though the 196 deliveries in the first half of 2020 were almost half the 389 recorded in the same period of 2019. The good news is that the company secured 298 new orders in the first half of this year versus 88 in the corresponding period of 2019.

All in all, it will be a long road to recovery. Superalloy mills are not producing, with any orders being on a just-in-time delivery basis; scrap processors therefore need to be sitting with processed stock and able to deliver quickly. This will probably be the new norm until passenger jet numbers return to pre-COVID levels.

The LME cobalt cash average was US$ 29,500 per tonne for both April and May but dipped to US$ 29,100 in June to yield a quarterly average of US$ 29,370.

China has probably made the best recovery since COVID-19 hit economies globally. However, the surprising rise in exports is mainly attributable to medical equipment and face masks, with traditional industry products down around 30% in June.

Superalloy scrap demand and pricing remain weak throughout the world, with many scenarios envisaged as to when some improvement will be seen. While commodity pricing and intrinsic values have held their own, the question is for how much longer.