Metal Monday June 21, 2021 with Nick Snyder and Brett Ekart.
Play the youtube video and follow along with the text below.
Nick Snyder:
All right. Another Metal Monday, and it's funny how much can change in a week. We kicked off, we were sitting here, hey I think we found our new... Where copper's going to be; 450-ish, 460 maybe, and then the shit storm just... What happened, to let everyone know?
Brett Ekart:
Never get too comfortable I guess. I've had a lot of people hitting me up about hedging lately. Saying that maybe I should look into hedging. And I see where they're coming from, and there's some super smart people out there that that's what they do, and they're much smarter than me.
Nick Snyder:
Because a lot of scrapyards, most scrapyards, don't hedge. The people I talk to.
Brett Ekart:
I think big processors do, because they have so much... A lot of brokerage houses hedge.
Nick Snyder:
Mm-hmm (affirmative).
Brett Ekart:
We basically hedge with our physical inventory. So, I mean, for us there's opportunities where we could if... Hindsight's always 2020, where maybe you could've, should've, hedged at a certain number. But also, if you do hedge, you miss out on the upside.
Nick Snyder:
Exactly.
Brett Ekart:
So that knife cuts both ways.
Nick Snyder:
Yeah.
Brett Ekart:
And as long as you're willing to stomach the L, just like you are going to pat yourself on the back for the W, then I think that depends on your volume, depends on your business model, depends on your cash flow. There's just so many... Everybody runs their business differently.
Nick Snyder:
Mm-hmm (affirmative).
Brett Ekart:
So I think it's all situational. But yeah, last week the FLMC came out and basically said they're going to, at some point, start tapering the helicopter money, and maybe think about raising rates in 2023.
Nick Snyder:
Yeah, 23, you're right.
Brett Ekart:
Yeah.
Nick Snyder:
That's what's weird to me.
Brett Ekart:
I know.
Nick Snyder:
That affected the market and so far away.
Brett Ekart:
But it just shows you how global and how big trade... I mean, there was obviously China came out and said that they were going to try and curb some of this inflation on their end with commodities prices, food being one of them, but also base metal commodities, and open up the reserves, which the last time they did that I think it was '05 on the copper end.
Nick Snyder:
So what does that mean? Does that mean they actually physically sell some material off?
Brett Ekart:
They physically sit on X, Y... I don't know the total amount.
Nick Snyder:
Yeah.
Brett Ekart:
But they sit on material.
Nick Snyder:
A certain amount of tons that they sit on.
Brett Ekart:
Basically almost as their own inflation hedge.
Nick Snyder:
Yeah.
Brett Ekart:
Because there's such a manufacturing-driven economy that's slowly transitioning, or quickly transitioning, depends on how you want to look at it, into a consumer-based economy. Well, because they still lean very heavy manufacturing, they sit on reserves of food, reserves of base metals, reserves of commodities in general. So basically what they just came out and just said, we're going to release some reserves, sell some reserves, add some metal liquidity to the market, and basically hope to stop the price movement up. And they did, I mean.
Nick Snyder:
They were vocal. That was their plan.
Brett Ekart:
Yeah. But the reality of it is, is if you're trading and you're selling off on that, in my opinion, this is 100% my opinion, that I think you're super short-sighted.
Nick Snyder:
Mm-hmm (affirmative).
Brett Ekart:
Because for right now the mantra is okay, risk back on, the stock market is moving up big time this morning. Okay, we don't have to worry about inflation. And if you agree with that, then you probably should sell. You probably shouldn't exit some material, if you're long. It probably is, if you really believe that to be true. I don't believe that to be true. I believe that it's inflation, that game is going to get sparked up again. I mean, you saw lumber get whacked last week, and I think that people are thinking the same thing with some of these other commodities. But I don't believe that. I believe that this is a traders market right now. I feel like the market's came off, because it has been hot for the last 12 months. And just like anything, everything gets its momentum trades. I don't know.
Nick Snyder:
You never see just a constant up. There's always little dips in it. And then a lot of times the trend will go back up.
Brett Ekart:
And you just have to determine is the new trend down?
Nick Snyder:
Yeah.
Brett Ekart:
Or is the new trend still up? Is the new trend sideways? And you as a company, you as a trader, you as an individual electrician, or plumber, or whatever, you have to decide. Is this a blip in the market or is this the new normal?
Nick Snyder:
It feels like a blip to me. I mean, and just so everyone that doesn't follow it every day, we saw copper fall around 40 cents last week.
Brett Ekart:
Mm-hmm (affirmative).
Nick Snyder:
Which is a big movement. So all those good buys from the prior week went to shit.
Brett Ekart:
Yeah.
Nick Snyder:
So you're, at best, cutting even on some of those buys and that's what we do for a living. We're used to it. But everything else is still fairly strong. Nickel dipped under eight, but aluminum still really strong. I mean, rhodium got its ass kicked too. I guess that's the other one. Copper and rhodium are the ones that really got-
Brett Ekart:
Well palladium.
Nick Snyder:
And palladium, yep.
Brett Ekart:
Palladium got whacked.
Nick Snyder:
Yeah. And I see palladium up 92 bucks today. Things are recovering. We'll just see how far they go.
Brett Ekart:
It depends on how long-term is your outlook, I guess.
Nick Snyder:
Yeah.
Brett Ekart:
And what did you buy it for?
Nick Snyder:
Mm-hmm (affirmative). Yeah. And that's why as a company, you've got to find that sweet spot. We want to take care of our customers, but our business is difficult.
Brett Ekart:
Our prices go up and our prices go down, because we're buying off the market today.
Nick Snyder:
Yeah.
Brett Ekart:
And that's what your customer base has to understand, is if your price isn't moving, then whoever you're selling to, they're not adjusting their price. They're not giving you the upside like they should.
Nick Snyder:
Mm-hmm (affirmative).
Brett Ekart:
And I think that's the difference. So we're going to move our prices up when the market's up, we're going to move them down when it's down, and we're going to try and stay in tune with where our prices should be.
Nick Snyder:
Well hopefully next week we give everybody good news that everything went back up 30 cents, 40 cents. But we'll have to wait and see.
Brett Ekart:
Yeah. We'll see what happens. We won't hold our breaths. Maybe 450 copper might be a reach again. We'll see.
Nick Snyder:
Yeah, we'll see.
Brett Ekart:
I still think we'll get to five.
Nick Snyder:
All right. Thanks everybody.
Brett Ekart:
See you.