London 06/04/2016 - Premiums for ferronickel have surged in China, with stainless steelmakers battling to source the products on a tight spot market.
Some traders reported completed deals for ferronickel with nickel content of 20-40 percent at around $100 CIF Shanghai while offers were as high as $200-250 this week.
"Ferronickel shipped from Europe to China used to trade at a discount or parity in 2015 but now the situation has changed completely - increased demand from the stainless steel industry is the key driver,” a trader said.
China's stainless steelmakers tend to prefer cheaper nickel pig iron (NPI) over ferronickel but supply has tightened largely due to export restrictions in Indonesia and production stoppages at local smelters.
As well, refined nickel prices have fallen, making the metal more attractive as an alternative feed.
"NPI is in an extremely short supply as Chinese producers cannot afford to produce the material due to the low nickel price so imported ferronickel is filling the supply shortage gap,” second local trader said.
Ferronickel contains a minimum of 15 percent nickel while NPI traditionally ranges from six percent to 15 percent, according to ISO standards.
Premiums on ferronickel are likely to remain high in April and May, which make up the traditional peak season for stainless steel production, several sources claimed.
"The operating rate of stainless steel producers in China was less than 50 percent before Chinese New Year but it has already gone up to 70 percent in March," a third trader said.
(Editing by Mark Shaw)