Metal Monday October 11, 2021 with Nick Snyder and Brett Ekart.
Play the youtube video and follow along with the text below.
Nick Snyder:
All right. You know that time, Metal Monday. How you doing today, Brett?
Brett Ekart:
You know, man, I cannot complain whatsoever. I feel like I just blinked my eyes and the weekend was over.
Nick Snyder:
Yeah. I felt like it was Friday morning just the other day, and now it's Monday morning. But Friday, we had a good run, today we're having a great run.
Brett Ekart:
Yeah. So far, right?
Nick Snyder:
So far.
Brett Ekart:
Base metal's a little bit in the PGM, so...
Nick Snyder:
Copper's up, palladium's up, nickel up a penny.
Brett Ekart:
Yep.
Nick Snyder:
Aluminum up... Aluminum, that thing's still just killing it.
Brett Ekart:
Yeah, it's on the bull run of all bull runs, right?
Nick Snyder:
Yeah.
Brett Ekart:
It's as strong as I've seen aluminum in a long, long time.
Nick Snyder:
So that's great to see. What's driving this recent uptake? Do you have any....
Brett Ekart:
In aluminum?
Nick Snyder:
On all of them.
Brett Ekart:
Or just on everything? I think everybody was getting pretty nervous about China and that Evergrande, and I think wondering if that was going to be the next Lehman-type moment that was going to shake the foundation of, obviously, one of your biggest-
Nick Snyder:
So what was that? That was like a bailout that the government did for them?
Brett Ekart:
Yeah, basically I think the way I understand it... And I'm no economist, but the way I understand is the Chinese kind of came in, as the government, and said, "Either fix it, or let's dial it in." But they also basically stepped in and said, "Hey, we're going to be there to backstop this and make sure this doesn't crater the economy." The stock market, base metals, everything is... Not everything, but a lot of it's based on momentum trading. So there's a certain intrinsic value that metal has, whether it's copper or gold or silver or palladium, and then there's also the anticipated future value of it. So people will kind of move into certain commodities, or move into certain stocks or certain whatever, because they feel like there's some upside to it.
Brett Ekart:
And I think that's where you get these big movements, these big swings in copper, these big swings in the PGMs, big swings in nickel and aluminum, it's like when the headline reads, "Nickel's a scarce element and it's going to be absolutely crucial to the next battery powered vehicle," all of a sudden, you see nickel just for a month straight just sit there and just kind of tack on gains, and then it kind of falls out of favor because something else happens. So the markets we live in are very heavily traded on people that never touch a pound of material. So we're kind of living in that moment, but we're on the flip side, where we're actually receiving, processing....
Nick Snyder:
You can walk in our yard and see our material.
Brett Ekart:
Yeah, we're not trading aluminum futures. We're actually buying aluminum today, packaging it and selling it to a smelter, and getting paid 60 days later or 30 days later, depending on the terms you have, right?
Nick Snyder:
Yeah.
Brett Ekart:
That's the business that we're in. And so we are kind of at the mercy, sometimes, of these momentum trades, these futures markets, and the macro... My wife asked me why I read so much, why I pay so much attention to what's going on across the world, and anymore it's because a lot of that affects these markets.
Nick Snyder:
Absolutely. It's so reactive. And that's one thing, I think it's... In my honest opinion, I think it's too reactive sometimes.
Brett Ekart:
Yeah.
Nick Snyder:
You get one article about something in China and things just take a shit, and then people calm down and realize the world's not ending, and then you see kind of a rebound. That's kind of what I have noticed on a lot of those articles that come out.
Brett Ekart:
Well, it's like, if you look at the PGM market. I was just looking at it this weekend. So the reason the PGMs have gotten beat up as of recently was because the demand softened. Well, why'd the demand soften? Well, because of the microchips that go in these cars, which then you start digging deeper and you say, "Okay, so what's the car sales? What do those look like? What's the dealership inventory look like?" And everything's just been getting pounded. Well, it's a natural chain of events and you can understand why those commodities have kind of fallen out of favor today. Does that mean that those commodities are going to be out of favor a month, six months, a year from now, when all of a sudden there's a little bit more chip availability, all of a sudden these cars are coming off the production line again?
Brett Ekart:
In my opinion, that market's going to scream again, because they're still facing a supply deficit over what's going to be demanded coming forward. But if you get caught up in the day to day, which is where people like Pete Thomas come in with the hedgers and stuff and say, "Okay, protect your margin. Because you may not be able to buy that ounce today and trade it tomorrow, hedge your gain," or whatever, and as a scrap metal recycling facility, you have to make that decision: Do you want to hedge, do you not? But you can't get caught up in the day to day swings as much as just knowing your margins, knowing what you can live with, knowing the swings are coming, and then just kind of getting the material through the system.
Nick Snyder:
Yeah, just managing it from there. We didn't know what Ferrous was going to do exactly last week, but what did that end up doing for everybody?
Brett Ekart:
Some markets were up, actually a few markets were up, and then some were just sideways. And the ones that were up, you're looking at five, 10 bucks.
Nick Snyder:
So not a whole lot of movement, but-
Brett Ekart:
It was sideways for the most part, a little bit of movement, but in general, it was... Which isn't the worst. To see it flatten out for a little bit is okay. I feel like November and December could be good months sell if you've got material to move, but that deal changes on a dime.
Nick Snyder:
Yeah, absolutely. All right. Anything else to add?
Brett Ekart:
That's it, man. Another Metal Monday in the books.
Nick Snyder:
Another one down. Everyone have a great week, and we'll see everybody in a week.
Brett Ekart:
All right. Have a great day.