The pendulum swings millward with a vengeance

Dec 01, 2008 | 05:16 AM |

Watching the mid-October stock market collapse, rise, then collapse again was not a pleasant experience. Television news showed the anguish of traders on the floor of the New York Stock Exchange as even blue-chip stocks like PepsiCo Inc. fell to new lows.

They had it easy; they could go home when the market closed at 400 p.m. The shock and awe they suffered was mild compared with the migraines that many of the nation's ferrous scrap dealers endured.

Ferrous scrap prices didn't simply plunge in mid-October. They fell into an abyss.

With steel product sales sagging, inventories piling up and mill operating rates falling, none of the mills was buying even a pound more than they needed to meet their production requirements. Many steel mills didn't want scrap—some didn't even want the scrap they already had ordered—while those who were buying took far less than the usual tonnage purchased for each month's melt program.

One respected industry analyst estimated that mills were producing at only about 77 percent of their capacity in early October, although capacity utilization rates calculated by the American Iron and Steel Institute were still showing domestic mills' operating rates in the 80s.....