Ferrous

OVERHANGING THEORIES

Recent ferrous scrap price declines have processors looking for answers—and developing theories when the answers are not readily apparent.

Drops in ferrous scrap prices came in late winter and in the spring after ferrous scrap hit a “peak” that was far short of the summit most traders hoped would be attained. In some parts of the country, the price declines have been coupled with a dwindling (or at least more distant) demand for ferrous scrap.

“The biggest problem is that most yards are not able to sell their buy—and that has only happened in three months of my 30 years here,” says one southwestern U.S. processor. “That overhang in the market is a very uncomfortable thing.”

The processor believes mill buying habits may be to blame for much of the local problem. “Two of the largest shredders here are run by mills, and they certainly have an intention to control more of their own destiny when it comes to scrap,” he notes. “I suspect they could be buying out of the district to disrupt [local] markets.”

Another scrap processor, this one in the Southeast, is wondering whether Alan Greenspan should be blamed for the scrap market’s current woes.

Noting the oft-repeated anecdote that Greenspan closely tracks ferrous scrap pricing as a leading inflationary indicator, the processor wonders whether Greenspan increased interest rates in part after seeing ferrous scrap prices rise for several months in a row. “Is it time to start an “Impeach Alan Greenspan” movement?” he asks.