We think that alloy surcharges will increase for the second consecutive month.
This is because, despite weak international stock markets, metal prices stabilised or even rose for some commodities.
Nickel
The high volatility of nickel prices gained strength again in September. With daily fluctuations of 8 per cent, the price fluctuated between USD 20 and USD 25. On a monthly basis, prices advanced by almost 15%. The performance of industrial metals thus ran counter to that of stock markets, which fell by 7-8% over the same period.
The INSG (International Nickel Study Group) maintains its forecast that there will be significant overstocking this year. However, there is still no evidence of this in LME stock levels. These inventories continue to fall, albeit at a slower pace. Stock levels fell by almost 2,000 tonnes during the month of September, reaching 52,700 tonnes at the end of the week, a level as low as they were 14 years ago.
Energy
Energy surcharges are increasingly relevant to overall costs. For some products, the energy surcharge already represents 30-40% of total surcharges.
Peak gas prices at the end of August, when the Nord Stream 1 pipeline from Russia was disconnected, led to extreme growth in energy surcharges in September. In October, energy surcharges rose only slightly more.
As the late August spike was mainly due to market speculation, the price quickly returned to where it was and prices fell immediately when it became known that Norway could cover most of Russia’s losses. And so, the current gas price is 150 euros/MWh, 50% less than at the end of August. We therefore expect energy surcharges to fall slightly in November. We will have to wait and see to what extent the start of the heating season will cause gas prices to rise again.
Implications of the above and our observations
We expect small to moderate growth in alloy surcharges during the remaining months of this year. Despite the tremendous volatility, some price strength prevails. Significant price swings due to speculation cannot be ruled out.