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To: Zeus549 who wrote (4271)	3/6/1998 12:03:00 PM
From: David Graham	Read Replies (1) \| Respond to of 7006

Lee; Your reasoning is sound in both directions, up or down. Market pressure from dwindling demand from an increase in price would do the same thing. I don't see this as a real danger as the price spread between virgin and recycled is very high and I don't think it will change in the near future. As they roll-up companies and increase the economies of scale they should have a competitive advantage. If price drops, so will everyone else's and management will make the difference in profitability. If they have to pay more for scrap so will everybody else and the price will climb. The converse is true also. Management is the key to profitability here and I have a lot of faith that they will be able to maintain a competitive edge. Grammy

To: Zeus549 who wrote (4271)	3/8/1998 11:29:00 AM
From: ed doell	Read Replies (1) \| Respond to of 7006

>>Grammy, I still say that price does matter. This is a supply and demand market. Price is usually an indicator of demand. If scrap prices are falling then demand from the mini mills is probably falling also which means less overall tonnage which means less revenue which will eventually mean less earnings because I do not believe overhead fluctuates on a one to one basis with the market. You can adjust your margins all you wish but 4% or 10% or whatever it is, is 4% or 10% of a smaller overall figure if price decreases. So the fact that they buy for less and sell for less thus "maintaining their margin" doesn't mean they will have the same earnings if there is price erosion due to slacking demand. Maybe I'm really dense on this, if so please explain.<< ************************************ Lee, I advanced the same line of reasoning a few months ago and got labeled a "naysayer" for saying so. If the fundamentals follow that scenario, I don't see any other conclusion except the one you advanced above and my similar thoughts a few months ago. Ed