The US economy is now facing its highest inflation levels in 40 years, according to the latest CPI report, and the Federal Reserve is widely expected to start raising interest rates in response. The rising price levels have been pronounced in the commodities space, with mixed implications for US recyclers: while prices for nickel and stainless steel scrap have been on the increase, thus boosting recyclers’ revenues, energy prices are also elevated and have therefore raised operating and transportation costs.
Transportation bottlenecks continue to act as a drag on firms’ ability to get material to domestic and overseas customers in a timely manner. Even as the value of US stainless steel scrap exports increased 24% in 2021 to more than US$ 340 million, the volume of overseas stainless scrap shipments actually declined 3% to 304,000 tonnes, according to Census Bureau trade data. For exporters, the long list of shipping obstacles, coupled with reduced demand from Taiwan, more than offset improved demand from markets including India, Mexico and Canada.
Domestic market conditions have been largely positive and major stainless steel producers such as Outokumpu’s Americas unit posted record revenues in 2021. At the same time, total US steel production increased 18% last year to 86 million tonnes, according to World Steel Association figures. But US carbon steel and stainless steel market conditions have diverged lately, with hot rolled coil steel prices having dropped from highs around US$ 1900 per ton in 2021 to less than US$ 1200, according to recent reports.
Looking forward, the pace of Federal Reserve rate hikes and their impacts on the US economy will be squarely in focus. In the long run, US economic growth and stainless steel consumption are still closely related.