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Although nickel price volatility was relatively restrained in September as LME nickel traded between US$ 20,000 and US$ 25,000 per tonne for most of the month, North American stainless steel and nickel alloy market participants have recently been reporting softer sentiment. US manufacturers have become increasingly concerned about managing their inventories in the face of rising interest rates, slowing demand and a stronger dollar. The traditional summer lull in steel output and trading activity has also played a part.

According to the latest numbers from the American Iron and Steel Institute, year-to-date US crude steel production through late September was down 4% compared to the corresponding period last year. At the same time, the US steel industry’s capacity utilization rate dipped to 76% in late September, down from more than 83% at the same time last year.

For domestic scrap processors and dealers, tight labour markets and uncertain transportation networks continue to pose challenges. Although declining container rates are indicative of gradually improving availability, the USA continues to suffer from shortages of trucks and truck drivers. While the potential for a US railroad strike has been averted for now, lingering uncertainty surrounds the outcome of negotiations between the ports and labour unions.

On the bright side, softening domestic market conditions have been partially offset this year by rising export demand for recycled stainless steel. According to trade statistics from the Commerce Department, the USA exported more than 253,000 tons of stainless steel scrap in January-July 2022, a 67% increase over the corresponding period in 2021 thanks to improved demand from India, Mexico, Canada and Germany. However, significant global risks from the conflict in Ukraine, elevated energy costs in Europe, potential LME bans on Russian nickel deliveries, rising nickel production in Indonesia and faltering Chinese stainless demand are continuing to loom large.

In the USA, major risk factors going forward include rising interest rates and slowing demand. The Federal Reserve has raised interest rates by 75 basis points in three consecutive meetings, bringing the target federal funds rate range to 3-3.25%.