In July 2024, nickel prices experienced a significant drop, erasing the gains made in the previous quarter. This decline has been closely linked to the weakened demand for stainless steel, indicating a challenging market environment for producers and distributors alike.
Despite a slight increase in sales during the second quarter, Outokumpu, a key player in the stainless steel market, acknowledged a "softer market environment." The company forecasted stable deliveries for the third quarter, but the overall sentiment surrounding stainless steel remains cautious. The prices saw a notable drop of 4.47% from July to August, signaling ongoing challenges within the sector.
Nickel prices fell by an additional 4.43% throughout July, leading to a general sense of instability in the market. Although prices seemed to stabilize in early August, they remained within the range observed at the beginning of 2024, effectively nullifying all gains from the previous quarter’s speculative uptrend. This situation has left buyers hesitant, as the declining nickel prices have diminished the incentive to purchase ahead of further price drops.
The stainless steel market has become increasingly favorable for buyers due to the lack of optimism among distributors. For months, stainless steel service centers have reported sluggish demand. As the summer lull approached, many sources noted that plunging nickel prices left buyers with little motivation to secure purchases, especially amid a rapidly declining stainless surcharge. This trend has been reflected in the quarterly financial results of companies like Ryerson, which reported a significant slowdown in stainless steel shipments.
Ryerson's stainless shipments saw a sharp decline of 4.9% from the first quarter of 2024, indicating worsening market conditions. While the company sought modest growth in its aluminum and carbon steel segments, the stainless segment struggled due to persistently soft demand. The results revealed a 1.7% decline from the second quarter of 2023, further emphasizing the challenges faced by distributors in the current market landscape.
The ongoing manufacturing recession has also played a role in dragging down overall metal demand. The ISM Manufacturing Purchasing Managers' Index indicated that manufacturing activity fell deeper into contraction during July, dropping from 48.5% in June to 46.8%. This decline underscores a lack of support for metal prices in the near term, as the manufacturing sector has largely remained in contraction territory since late 2022.
Middleby, a prominent food service equipment manufacturer and a major end-user of 304 stainless steel, reported challenging conditions during the second quarter. The company experienced a 4.7% decline in net sales, with all major segments showing annual declines. However, there were signs of a potential recovery, as orders increased from the first quarter. Middleby remains optimistic about growth in the latter half of 2024, which could bolster demand for 304 stainless steel if realized.
As the stainless steel market grapples with these challenges, the outlook remains uncertain. The combination of declining nickel prices, weak demand from major players, and the ongoing manufacturing recession paints a complex picture for the future of stainless steel and nickel markets. The industry will be closely monitoring economic indicators and potential shifts in consumer demand as it navigates these turbulent waters.
