Having excess of anything right now with the exception of groceries and toilet paper is scary. A lot of companies are over leveraged or in possession of excess steel coils that they aren’t using or are stuck with because of directed buys that have been cancelled. Covid steel has cost a great deal of manufactures a 90 day backlog of unnecessary inventory.
Inventory that costs money to maintain and move around the warehouse doesn’t make sense. There is no shame in selling it off, making room for the new orders that are about to come in when the economy rockets back to life – and guaranteed it will do just that. We will be amazed by the changes to the steel industry come by October.
Don’t believe everything you hear about steel
The talking heads surrounding the entire market including the steel markets and the secondary steel should be taken with a boulder sized grain of salt. Excess steel is just a part of the business and covid steel is no different. You didn’t do anything wrong.
Scrap drops again next month so now is a good time to sell steel inventory and look toward the future. It’s never really a “good time” to liquidate steel inventory because it means that by some force of nature, you’re being forced to make a move. Staying in business, staying competitive and staying relevant is not always about being the smartest but more about not being the dumbest.
Warren Buffet says that. His partner Charlie Munger says that the only information he really needed was where he was going to die so that he could avoid ever going there to begin with.
The market is sick but it will get better
Nobody has a crystal ball. I don’t know how this is all going to turn out but what I do know is that the steel industry is comprised of men and women who are firmly rooted in reality. The reality is that these times are unprecedented and the old adage “Tough times don’t last, tough people do” comes to mind.
That being said, we can offer a place to sell your covid steel regardless of it’s condition, age or quality. Hang in there, steel will come back punching as it always does.
Market Realist has a similar take here
Barrons also sees similar traits with Scrap Pricing