Why the big fuss over benchmarking No. 1 bundles?
Jul 30, 2008 | 01:20 PM
Auctions, like futures exchanges, sometimes seem like the magic bullet for price discovery. They let a commodity's value be demonstrated by disclosing actual transactions that can be cross-checked, free of bias. No human conversations needed to coax information from biased sources.
That's part of the reason there's such a fuss about the possible disappearance of the auto industry's factory bundle auctions, which have served as a pricing signal for industrial scrap. The controversy seems like a flashback to my first AMM stint in the mid-1970s.
The late Bob Himelfarb of Luria Brothers, a dominant scrap company of that era, hated the monthly table on rail scrap auctions. He didn't challenge the accuracy of the figures. What bothered Himelfarb was that some scrap suppliers would view the auctions as an objective measure of the rise or fall of steel scrap prices in general.
When rail scrap auction prices rose, suppliers would expect Luria Brothers to raise buying prices for other grades of scrap. But Himelfarb argued that railroad discards were exotic grades of scrap, signifying nothing about other materials, and maintained that AMM would be doing recyclers a favor by dropping the month-by-month series on rail scrap auctions.....
To access AMM's full content, please log in below. If you do not have an AMM account, we invite you to take a free trial or subscribe below.
Already a registered amm.com user?
Access to amm.com editorial content is granted only to paid subscribers and trialists. If you do not have an active account in your own name, please either subscribe or take a trial and you will have instant access to amm.com content. Sharing your login credentials with individuals who are not subscribers represents a violation of AMM copyright.
Every morning, every minute no matter how often you follow the markets, there's an AMM subscription to fit your needs.
Not sure if you are ready to invest in a subscription right now? Take a free, no-obligation trial. Start your free trial today.