Have surcharges taken the snap out of price elasticity?

Nov 01, 2008 | 06:16 AM |

Scrap dealers and many of the companies that supply them with steel clips from their stamping presses re-learned an old lesson a month or two back. Simply stated, the ferrous scrap market has a downside as well as an upside, that prices can plunge as well as soar.

And often, the decreases come at a much quicker pace than the increases. The prices of No. 1 busheling and No. 1 bundles climbed by $160 a long ton in April and another $140 in May, but they gave all that back in a single month September. Industrial steel scrap grades plummeted by $300 a ton or more that month.

Such drops were no surprise for many veteran traders and scrap processors. They have ridden the steel scrap price roller coaster many times in the past and know its peaks and valleys, but few—if any—ever expected to see No. 1 busheling and bundles at $900 a long ton. Many were astonished when industrial steel scrap prices soared to $450 a ton in fall 2004. Who knew that less than four years later it would be double that?....

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