Not so long ago on a fall night here in Chicago, I had the opportunity to meet up with a couple of folks from a steel producer.
What they told me then sounded a little scary — they suggested the “A” word — but not nearly as scary as current market conditions suggest.
In metals markets, the “A” word does not contain three letters.
It does, however, connote something far worse for many metal buying organizations: allocation!
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Allocation markets cause sleepless nights for procurement professionals because, without material, lines get shut down and businesses fail to operate profitably.
Undoubtedly, the dreaded “A” word is upon us, particularly for steel markets.
Back in May of this year, toward the end of the last COVID-19 “surge,” MetalMiner contemplated what could happen to steel prices once demand came back onstream.
MetalMiner saw two scenarios: a gradual increase in demand followed by panic buying or a rather dramatic increase in demand led by the automotive industry, combined with slow mill restarts and historically low starting inventory levels held by service centers.
We assumed the first scenario, but obviously the second ensued.