Miller on scrap: March market recap

The large drop in prices in some districts has resulted in the scrap industry’s version of the inverted yield curve. Prime grades like #1 busheling and bundles are selling at the same price as shredded or even less. Our colleagues in the financial sector had advised us that the inverted yield curve will result in a recession. So far, they’ve been wrong. But I’ll tell you this: if prime grades keep selling cheaper than shredded, we are headed for an industry recession, as steel mills will demand less scrap due to poor steel demand. I’m not convinced that things will deteriorate to that extent, as this situation typically doesn’t endure for very long. If it does, steelmakers will see an improvement in the residual alloys in their shredded scrap, regardless of beneficiation efforts.

There is another concern about the large dip in scrap pricing this month. Did the mills exhaust their ability to lower scrap pricing by already decreasing them significantly and rapidly leading into April? That remains to be seen. However, the true test lies in how obsolete scrap flows react to a sudden drop in pricing.