CHINESE stainless steel futures dropped yesterday, after opening more than 7 percent higher, as cautious investors assessed the uncertainties caused by surging prices of raw material nickel.

The most-active stainless steel contract on China’s top commodities bourse Shanghai Futures Exchange, for April delivery, dropped as much as 4.2 percent to 20,655 yuan (US$3,270.11) a ton, after hitting 24,785 yuan per ton earlier during the session. The contract closed down 2.3 percent.

“Current stainless steel prices have deprived from its own supply and demand fundamentals,” said Fu Zhiwen, analyst with Huatai Futures.

Fu also added that once the nickel turmoil on the London Metal Exchange (LME) comes to an end, stainless steel prices could drop back within reasonable range.

The LME was forced to halt nickel trading after prices more than doubled to over US$100,000 per ton Tuesday. Shanghai nickel contract hit a trading limit of 17 percent yesterday. Unlike the LME, commodity futures in China are subject to caps on daily price swings to avoid big surges in volatility.

All other steel products on the Shanghai bourse fell. Steel rebar, for May delivery, dipped 1.5 percent to 4,907 yuan a ton.

(SD-Agencies)