AMU Survey: UBC expectations fragment as scrap signals stabilized

UBC price expectations

December results showed a pronounced redistribution in UBC price expectations.

The share of respondents anticipating stable UBC prices in the next month fell to 46% in December from 69% in November. The reallocation of those 23 basis points flowed disproportionately toward higher price expectations in the December survey, though a meaningful portion also shifted into lower expectations.

Despite that movement, “higher” remained the least common response among participants. The net effect was a more evenly split distribution that underpins a loss of consensus rather than a clear directional turn.

Viewed by company role, the shift away from “stable” expectations was driven less by a change in respondent mix and more by greater dispersion within roles, particularly among scrap recyclers and processors.

In that group, stable responses declined while both higher and lower expectations gained share, reinforcing the broader pattern of fragmentation rather than directional alignment.

Interestingly, as UBC sentiment became more debatable, physical indicators moved toward steadier territory.

Scrap availability

On the question of whether there is adequate obsolete scrap supply to meet demand, December responses became even more one-sided than in November.

The share of respondents answering “yes” rose to 87%, up from 72% the prior month.

This complicates a purely scarcity-driven explanation for December’s UBC sentiment. Responses related to obsolete scrap availability point to greater physical supply even as UBC price expectations became less centered.

Collectively, this suggests either a continued decoupling of UBC pricing from broader obsolete scrap fundamentals, or a market recalibrating price expectations within an environment of looser physical supply.

That apparent divergence becomes more pronounced when a benchmark-linked signal is introduced alongside the physical indicator: Midwest premium (MWP) expectations.

Midwest premium expectations

Unlike most obsolete scrap grades, UBC pricing is quoted as a percentage of the Midwest transaction price, the London Metal Exchange (LME) cash settlement plus the Midwest premium.

As a result, Midwest premium expectations function as a critical price reference point for forward UBC sentiment, even when physical scrap conditions appear to be loosening.

December results showed a pronounced redistribution in the MWP expectations. After an even split between directional outcomes in November, responses in December collapsed overwhelmingly toward flat expectations, signaling a market that increasingly views the premium as a stable pricing baseline rather than a source of near-term directional risk.

That stabilization matters because it occurred alongside an elevated LME price environment, with the benchmark recently reaching roughly three-and-a-half-year highs, sitting at the upper end of its recent historical range and moving higher.

With neither the physical market for obsolete scrap nor the Midwest premium providing a clear directional signal, and with the LME elevated but facing growing uncertainty around the durability of that strength, respondents were left without a dominant pricing anchor for UBC.

In that context, December’s UBC expectations became more debated rather than more unified.

The loss of a “stable” consensus did not translate into a wholesale pivot toward lower prices. Instead, expectations redistributed across both higher and lower outcomes as respondents weighed competing considerations: looser physical supply conditions on one hand, and a premium-supported, LME-anchored pricing framework on the other.

Inventory management

The month of December marked the first month in the survey history going back to April in which no respondents reported growing stocks.

In the historical inventory series, December showed 0% of respondents building inventory, 76% keeping inventories steady, and 24% drawing inventories down.

This already followed a sharp drop in inventory-building responses in November, which fell to 4% from 13% previously.

The center of gravity shifted decisively toward steady inventory management rather than either accumulation or liquidation.

December does not read like a market bracing for a demand shock. Instead, it looks like a market in which most participants believe they can operate normally, without chasing material or selling it off, at a time of year when modest drawdowns are seasonally typical.

Consistent with that broader theme, inventory behavior among scrap recyclers and processors remained disciplined. No respondents in that group reported building stocks in either month, while December saw a modest increase in drawdowns, running counter to the slight decline in drawdown responses across the broader survey population.

Three-month outlook

Among scrap recyclers and processors, views on the three-month market balance remained broadly unchanged from November to December.

Responses continued to split evenly between balanced and undersupplied conditions, even as a marginal oversupply view emerged in December.

Tracing these responses together, scrap recyclers generally reported adequate obsolete scrap availability to meet current demand, maintained steady or declining inventories, and still anticipated a balanced-to-undersupplied market three months ahead.

At first glance, that combination may appear contradictory.

However, “adequate” supply is not synonymous with “abundant” supply, and inventory drawdowns are consistent with a normalizing market—particularly toward year-end, when seasonal flows often soften.

The three-month horizon also commonly reflects a transition between seasonal patterns rather than an expectation of abrupt dislocation.

Across the fully survey respondent base, including manufacturers and assemblers, distributors and traders, producers, as well as scrap recyclers and processors, the same directional pattern appeared, though less pronounced.

December recorded the lowest share of “oversupplied” responses since tracking began in March, a larger share of “balanced expectations at 56%, and “undersupplied” responses holding steady at 38%, little changed from November.