welcome to a scrap life a podcast solely focus on the hustlers Grinders operators and business owners who live and breathe the scrap metal industry every day we are the original recyclers no suits required just guts and hard work here is your host Brett eart all right we’re back October 2023 Bulls versus Bears me representing the bull side because I’m always bullish on where the scrap Market should be maybe not where it’s at where where it should be Chad represent in the beide because he’s trying to buy scrap at an affordable price so he can feed the steel mills and give us all the information he can give us to make sure that we are trading making trades that uh make sense this month so what’s up my man glad to have you back yeah thanks uh thanks for doing this I feel like October Market should be another another interesting market for sure I feel like more than I don’t all year really there’s a lot of it just feels like a lot of certainty is out there and it feels like no one has a real good grasp on what’s going on

in the market so this will be fun to to debate wild man it’s like there’s geopolitical events there’s I mean UAW strikes I mean so there’s like domestic events there’s I mean it’s just you know this King Dollar Reigns again this morning you know I mean I mean I was looking at the Marcus this morning it’s a bloody Monday Nick and I’ll discuss that but I mean it’s just it’s King Dollar is still there and man does that make it hard on you know on the scrap markets anything that has to do with base metals or Commodities man it’s it’s it’s it’s bloody this morning and uh I’m I’m hopeful that it’s just you know a weak start to a strong finish so here yeah and I feel like you know there’s a lot of optimism that October might be the bottom in the scrap Market but I’m reading like you said the strong King Dollar like you know Turkey just had a a power Tariff impos of 20% so that to me is going to help export Demand right then you got India Pakistan those are are those import levels are way down

so you know geez I was reading an article yesterday when I was sitting in my chair um they was talking about the Emerging Markets you know everybody was hoping that 2023 would be the year of the you know Emerging Markets kind of come to the table and and uh and bring that demand level up you know on the commodity side and it just hasn’t came to fruition for whatever for multiple reasons right part of that being the strength of the dollar I think that’s a big part of it um and part of it just being I think some of these Emerging Markets according to article are still heavily debt Laden themselves um so that’s playing a role and just the demand side of you know what they’re producing maybe isn’t what it once was and you know just a few years ago so so many wild statistics so many wild events and uh like you said uncertainty that is probably putting a cap on this on this thing you mean to tell me when you spend more than you make it can impact some of your future purchases no not in America it’s amazing

concept is it I mean in in other countries yes but in America no we just been like it’s just you know what’s the old saying that I think somebody I had heard somebody say if if if you owe the bank a million dollars then it’s then you’re the one in trouble if you if you owe the bank a 100 million then it’s the bank that’s in trouble that is like I think America that’s the way that they hang their hat is well we’re just going to see how much we can owe that way nobody’s willing nobody wants to call the no this is our problem this isn’t your problem yeah exactly exactly well hey let me uh let me share my screen here if you don’t mind give me a I got I got a good chart for you I’m excited all right so I’m gonna do instead of just doing the Bulls or just doing the Bears I’m I’m want to mix it up this this uh episode little back and forth you’re gonna give us you know one thing I will say is we initially when we first thought of this concept

it was Bulls versus Bears it slowly just turned out to be uh Chad breaking down the market and me trying to poke holes in it well well I I I think you got to like we were talking about overall demand you know it if does it isn’t good I think that’s the number number one theme this month in October for the scrap Market but I mean even even the Dow Jones we dipped down from you know 34800 per se to 33 400 a 4% decrease and I I always think the over what the overall Market is doing is a good representation of some of the psychology in the marketplace so where do you you think there’s a strong I mean I mean maybe I said do you think do you know do you have any charts that show a strong correlation to like the Dow Jones or the S&P and you know the pricing of feris scrap well well there’s definitely a a relation so I think in 2008 oil prices were or I think in 2009 oil prices are crazy right or you could say argue like lot of commodity prices were

crazy and then 0808 yeah 08 were cry prices yeah and then when fuel when oil stuck higher right the market went down and so and then even then you go back to 2016 or let’s go with more of a the better 2017 2018 fuel prices were more lower right and you had a fairly good economy so I do think there’s a correlation there but but when it comes to the scrap Market you’re really focused on steel demand you know and that like 2000 2000 was a tech bubble that had nothing to you know while it was good times it was the stock market was crazy steel industry was good but it wasn’t crazy so yeah but I always know like I can I there’s like certain points like pivot Points in my mind and that’s you know 99 2000 you know the market really 99 it was 9899 when it really took a um then we climbed all the way back out of it in through probably starting in ‘ 04 up through up through 08 and then end of ‘ 08 is when it really nose dived into 09 and you know 09

was pretty rough and then 10 came back with a vengeance with China and then you had that 1415 um election year and it was really we had really softened up death by a Thousand Cuts and maybe we’re you know about that pivotal time where it’s been a decent run and we’re gonna have to start uh batting down the hatch a little bit and see what uh see what the Market’s going to bring yeah I tend to agree and you know so we talked about a bearish point being the Dow Jones but so some people think oil U and steel coincide each other and we’ve seen crude oil surge in around $86 a barrel to 91 a 6% increase so what are your thoughts here I had a friend that once said I always know when it’s time to uh to get ready for recession he said when price of diesel hits five bucks so when price of diesel hits five bucks said it slows everything down the trucking he’s a trucking guy right so that’s always been his gauge and here we are pushing you know four over here 485 you know for diesel

today um and I think that and realistically in ‘ 08 when diesel hit five and some change I mean oil was 140 bucks 150 bucks so you know where does where does the price of diesel go if oil actually gets to 120 130 man it’s it’s it’s to the Moon Alice it’s going to be a it’s going to be a tough one so I I don’t know that I’ve I used to always say if if if we got $5 gas $5 diesel then that’s usually good for scrap because that means Commodities as a whole are ripping but this one feels kind of more like a an anomaly this one’s kind of it’s it’s like an outlier and the the cruds climbing but you’ve got wheat Futures that are getting crushed you’ve got your base metals that you know $3 65 66 copper um feris markets turning down while oil climbs is usually don’t doesn’t really happen that way all the time it’s like there’s uh manipulation going on in on the oil Market it’s crazy isn’t it well so happens when you drain the spr right you drain that thing and then you wonder

why you can’t cap it because you’re trying that’s just artificially trying to keep the price team down well I mean you know who’s got a better relationship with OPEC us or Russia and Russia’s going to make way more money on oil than than we than the United States is so yeah crystal clear this goes back to geopolitical events that are out there you know I I don’t see an end to the Russia Ukraine war anytime soon but should that come to an end I think that actually bodess well for a lot of economies and a lot of you know just the world economy in general um so I’d like to to see something get figured out there but I I think that as long as that thing is is still going Still rocking and rolling it’s going to make it’s going to create high high oil prices and lackluster demand you know yeah let’s jump over to a bearish point so if the pig iron Market in the US uh moved from around 440 to 430 metric down 2% you know I think this is um from from a m m buyer standpoint I

think you got to be super sensitive to where these are at because right now it feels like where bushling is at vers shredded vers plate versus heavy melt versus turnings versus pig iron there’s some real like gotta make there’s got to be adjustments there right is there does this affect the export Market more than it does a the domestic Market because we run mostly you know for primarily eaf furnaces here um is this more of just like an export indicator like hey if you’re going to export your feris scrap and you’re going to compete against blast furnaces then you need to be aware of the pig iron price is that I look at how do you look at it I look at this chart and say this this is one of the two biggest levers that like especially the river River Mills have right when when when demand is down which I think the Midwest demand is going to be not good this month that’s not that’s not going to Bod for for cut grades period Then you got bushling we don’t really know how much bushling is available uh with the uww strikes

right but the other lever they have is is is is Imports is Dr scrap substitutes being pig iron and drri any one of those can help you kind of pull pull your program together and and there’s and M shops want to melt bushling they want to melt pig iron and if the price is close and you’re and you’re running especially at full production it’s not it’s a no-brainer now when you’re not running well right then you got to say okay how do we how do we cheapen this up that’s why you seen turnings and heavy melts come up versus the other markets not but I I still think this is the ultimate like kind of the Ace in the back pocket with you’re Mill with less demand Market it’s kind of like I don’t really need to get too excited and Chase anything because I know my demand is not that great I know my competitor’s demand is not that great I know I can always go and buy pig iron or other other scrap substitutes so as a as somebody that’s on the a seller of ferah scrap you should probably be

aware of this obviously this price and then be aware of what Commodities compete with this com with this commodity right what you’d have and then what where the market was going to be on maybe your lower grade items which would be your turnings and your cut grade scrap right because those are somewhat relative cheaper substitutes to bushing or Pig right yeah I feel like it you know shreded has gotten cleaner uh lower alloy in the last well it’s been a new revelation since really since the Russia Ukraine conflict so I feel like the not Pig scrap substitutes not only affect it used to just be bushing really right but now it feels like you know like right now Bush shred are basically the same price so inflate is is a similar price so it just feels like that’s why you have to think about all three of those grades against this because they’re all you know as a milbar like I’m buying scrap this month what do you got you know it’s it’s not this is your price for this or this or that so if you run this chart out um a little

farther Chad if you go so say we’re looking at like say around the 10th of April um and it’s around that 560 565 number and then if you always say today you’re looking at around a 430 number if you go back say a year ago or two years ago what is that how does that does that number look like when the Russian Ukraine war happened is 800 bucks 00 bucks so where where was it before that it was I mean it was it 400 bucks so so are we like probably closer to a historical average around this between say 4 to 440 is this a more Norm something that is probably more par for the course yeah I mean let’s just you know iron or let’s just say it’s a 100 bucks two price I think it’s around 130 today okay so let’s say it’s 130 bucks to buy some iron or buy some Coca-Cola and then you you it takes two I don’t know 150 200 bucks to convert it then you got to Freight it across the world basically you know so yeah there’s there there’s a number there where it

you’re it gets pretty tight and I think we’re not we’re getting closer to those levels where just like scrap it’s elastic right you can only go so low before I think that’s what we learned in in the Russ Ukraine war is pig iron is also elastic meaning when it goes to $900 a ton like there’s a lot of steel mills in the world AKA Brazil India China says hey I can make pig iron instead of Steel for that much right and that’s what we’ve seen so I think ultimately like this is the number that actually probably keeps a ceiling on if any if there’s any you know any commodity price out there it’s the pig iron price that keeps a ceiling on your scrap Commodities in general yeah yep and and the the smart Traders know that right they know like this is not going to be a month you you try to get the best price you you chase the sale more than the price this month makes sense so all right well so we we touched on a bearish point so let’s only right that you swing us back the other direction

and keep this thing Fair we we want we want uh yes so this this this chart I find a little little interesting right so we talked so far a lot about Demand Being down right yeah but steel Le times on Hot Roll which is one of the biggest indicators on De of demand in the United States not a big change but went from four to five weeks to five to six weeks so I feel like this is uh this is definitely um something that that I find peculiar I think utilization rates went up by a couple percent over the month so not not a big change but that that’s it’s noteworthy yeah it’s part of the it’s part of the overall equation right yeah and is that what is in your opinion does that have anything to do with um all the Mills that were that took uh maintenance downtime in September is that yeah again it’s like we seeing in the oil markets you’re seeing the same thing so like it feels like you know these Mills are singing In Tune about taking demand out just like we’ve seen it like with OPEC

right and and like furthermore you know Cleveland Cliffs is typically been the leader in in trying to create pricing um directions right so I think I think last week they announced early uh or L late in the week I guess that they announced the price increase in Hot Roll is now at 7 50 because Elite times are expanding so I think they’re trying they you know they’ve struck out a lot here recently so it’s not like I think if you go back two years ago it’s like oh price increase like the worm has turned right now it seems like they they’ve they’ve tried this and don’t always win or always successful in this so we don’t know but it is a definitely a leading indicator and I think that’s you know ultimately take that take that it’s kind of like a take it with a grain of right I mean lead times are up and that’s just because demand is down and they’re taking they’re taking units out of the system but goes back to what you previously said before you um brought this brought this slide up and I want you know the

reason we do this podcast is so you you guys are informed do you understand the market right so when it goes back it goes back to chasing a sale or making sure you have a sale versus trying to chase Cas of price or whatever there’s certain months where it might be worth holding back it might be worth you know saying ah I think October November December is going to be better whatever and that’s your prerogative but if you’re in a position where you you are turning your inventory or cash becomes a big part of the equation then as you know as Chad said the smart Traders I think this month are you know making sure they have you know volume locked up sales locked up so they can run their business and keep things moving not with a really uncertain um November you know hanging around yeah absolutely and uh so we’ve we’ve kind of jumped back and forth uh on Bulls versus Bears so I’m going to jump on you know I feel like lead times expanding is definitely a bullish point but on the other side you got hot roll fall pricing

falling which I feel like is anomaly right you never see lead times go higher when you see pricing come down so that one of those is going to happen have to change and so um we La this month so far or I guess in the last month we dropped Hot Roll coil Futures decline from 718 to 697 so you know a 3% decrease but if you look at this chart longterm man we didn’t really I mean 2022 was just unbelievable 2021 yeah 21 right and then I mean you know that one just was what is what it is that was a Trader that’s a trading trading game um hope all hope all the steel mills made a lot of money that year so they could uh keep us you know us poor lonely scrap guys in business for for you know during this uh slow down the market um and themselves you know I you don’t want the steel mills to go broke you need them in the game so don’t ever get it twisted um yeah I thought this was the scrap scrap dealers p&l by month by month here there hey

there is there a lot of Truth to that I’m I’m not going to lie I think when you look at that and you start you know I think it’s I think that mirror is probably um um steel mills P know you know maybe maybe maybe they maybe they don’t drop all the way into the down below that historical average line of 697 or whatever but I I feel like the brunt of that got made um by the steel mill so but you know hey Bottom Feeders you know we just take what we can get just try and keep the lights I hear you I hear you I hear you well let’s jump to it let’s jump to the final bullish point I have this call points and this is interesting so this is Zorba and it’s up I went from 68 to 72 cents 6% increase and and while you’d say well probably aluminum’s up I don’t really think it is I tend to think this is up because treaders scrap is elastic meaning the more you pay the bigger the pie is the less you pay the smaller pie the pie is I

think shred feed overall is to me this is indicator that hey shred feed might be down the pie is shrinking so much the zor of demand is still there and therefore they can’t get the unit so they had to pay a little little extra pricing for it what are your thoughts here I I think that’s very true I don’t know like you know going through the charts like that you just showed I don’t know it’s necessarily um a volume as far as like they have an excess amount of volume I think you know you there’s been a lot of Shredder installations in the last say five years right plus a lot of consolidation people got a you know some pretty big nuts to crack as far as you know volume wise what they need to run through the system whether it’s just a break even deal or you know whatever so at some point you have to find that sweet spot on volume and you can’t do it at half the volume you once did I think so you’re going to have to pay up you’re going have to pay a little better price

to try and drag you’ve got more competition there’s going to be more competition out there so you’re going to have to pay a little better price and especially when in a market that’s starting to tighten down for the you know the average scrap metal recycling company there it it where once was less about price right because everybody was making money and now becomes like what’s the price because the people become more price sensitive which then you know as the shredder as you know as the you know almost the end consumer I I consider shredders like dang near the the end consumer um you’re going to have to you’re have to pay now to compete it’s it’s a game of customer service it’s a game of location due to freight cost diesel costs but also becomes like a uh a game of pricing now more than ever and zor is not a grade you can really hang on to right there will be shrinkage there over time so I think that is you know that that would just indicate that all the things you just said that if they can’t hang on to a lot

of inventory there’s probably not a lot on the ground the only way they can produce more is go out and be more competitive on the price so yeah I mean so I I believe that zor pricing is up probably because I mean aluminum pricing isn’t up right stainless nickel price isn’t up I mean a lot of your you know any of your um any of your Downstream Commodities coming off of a shredder they’re not exactly up right now so um yeah talking about nickel here’s a nickel chart we’re down 7% this month yeah that’s a uh I mean you know I I I think you know what’s what’s crazy is I is is like the 304 and 316 price never really caught up to like Peak nickel pricing right um there was definitely a lot of uh a room in there and so as even with nickel being off say 7% this month you haven’t quite seen that in your you know your basic um stainless pricing um which is is I guess in in a way it’s a good thing that means that those margins are starting to compress as well um on

the buy side so that’s I I at least I haven’t seen a big a big movement on that front you know it’s pretty much kind of been hanging around steady Edie so I think that’s been that’s been our theme like last 60 90 days is margin compression is real yeah no matter what commodity you’re you’re dealing with whether it’s nickel Ferris you know and if your margins are getting compressed then you you you have a couple options you know you either go find more volume right or you know you cut your costs like that’s really like what you have to figure out as a company whether it’s a consumer or a dealer like you really have to me I look at you those are your two options you either got to get your cost in line or you got to go find more volume so you can um keep the same amount of Revenue yeah the the volume aspect seems very very challenging I would think yeah that’s a that’s a tougher go you know and I think you know the only way you do that is maybe some some smart you know consolidation

some uh some consolidation at below market value that you can you know actually try and keep some of that in house but even that today’s interest rates and people still you know thinking their business is worth a zillion dollars you know that is a tougher that’s a you know on the consolidation side that’s a that’s a tougher deal than it once was as well yeah I feel you know I pay attention to the real estate market and I was listening to um real estate agent or broker and he said you know the biggest problem with the market today is I mean sellers are theyve still don’t have perspective of what real pricing is today you know if these guys that that are got to refinance the next six to 12 months you think about even if you it’s 2018 you took out a fiveyear arm right that’s pretty standard in the real estate industry could and today it’s coming up in the next six months you’re either underwater on cash flow right because the interest rates yeah no one wants to put more cash into a deal that’s already upside down and the banks

aren’t real excited to even you know to continue that loan anyhow and for anything so I just feel like there’s going to be a lot of whether it’s commercial real estate whether it’s uh business pricing I think it’s going to be a you know a a tough road for the next 12 months absolutely you go into an election year where I think nothing nothing creates more you know pricing pressure than uncertainty right I mean I think that’s the you know I think that’s the the theme of this Bulls versus Bears is there’s a lot of uncertainty out there and it’s and it’s creating weird Trends in the market like up oil down scrap um down nickel but same you know stainless price and there’s just a lot of weird trends that don’t normally I feel like you know flow with each other but eventually I just like anything they eventually catch up one way or the other right it’s like like you were saying on the on the lead times eventually something’s going to happen either lead times come down or pricing comes up like but eventually that they they will start you know

coming together it’s just a matter of when and what event causes uh that to happen and I would say you know on the bullish cases that if you look at Hot Roll and bushling Futures they’re still they’re holding up they’re standing resilient in the face a lot of diversity in my opinion so that that really again not the well end ought to be all but that’s that’s a pretty strong indicator that there could be better times ahead on because of that yeah I would say because of the capacity taken out and part of it is and I I mean they may be trying to raise the interest rates and and take away you know some of the like the velocity of money out of the system right the the deal making capacity the The Lending capacity or slowing that down but you still have to know that they’re still printing a boatload of money every single year right at the end of the day like I still like firmly believe that Commodities in general is not a bad place to be in the medium to long run now short run that’s that’s your trade

to make I’m not making that trade for you right like what’s that old like don’t listen to what I like don’t listen to what I say go do your own thing um but I truly truly believe that you know it’s it’s a good industry to be in you just you know you better pick your spots you know there’s gonna be months to chase a price and going back to what you said there’s months to chase a sale so you know be smart out there well I think you know talking about do as I do as I say not do as I do or you know whatever I think this is a a telling this is my last beish point last point I have and I think this is usually I don’t talk about this but number one heavy M New York deal export yard pricing what they would pay to other folks right is down it’s down 3% 290 to 280 that’s this great line and you can see these these three charts are these three lines we’re looking at is is Turkey’s price what is New York like what is the the the

exporters pay like the New York delivered to their export yard and then what’s the national average for number one heavy melt and you can see there there’s there it gets inverted but at times but it but in general um we’re kind of at normal times on all three of these prices and you can see when one starts coming down typically the other two are going to follow so yeah UL the ultimate bearish point there we go yeah as the world uh turns I mean that you know at some point turkey’s going have to rebuild don’t forget everybody they did have that earthquake here just earlier was it this year that decimated I mean I mean a lot of infrastructure there I mean it it still comes back to whether they buy us scrap that’s the Difference Maker right I think that’s that’s what’s going to have to you know be taken into consideration is we’re not the only country that exports exports scrap so um as long as the King Dollar rains then turkey might be buying scrap but they’re just might not be buying our scrap yeah and and like if there’s a

hurricane or you know earthquake in California we wouldn’t say oh the whole world you know the whole United States going to come back and I think that’s relatively about how much that earthquake impacted you know things so it’s definitely gonna definitely impacts but I I don’t know if it’s gonna be enough to hold up the whole the whole yeah not the whole scrap complex right I mean from an infrastructure standpoint you know that’s why people I think people need to if I’m watching anything right especially listening to this podcast and knowing like what your points are what you’re looking for you know as a mill buyer like and someone that’s in the market every day you know I I look at my top two are what’s the dollar doing doing I think that’s important because that’s going to kind of determine some of your export markets but also pig iron what is the what’s the pig iron price doing and I think you pay attention to those two things and obviously there’s a myriad of you know three or four more points that like they probably fall in line somewhere somewhere in there you

probably have a pretty good view on where you should be in in this market as you decide you know whether to sell or whether you decide to sit on some tons or whatever that whatever that looks like for you run your business the way you want to but this might be a month to uh make some scrap go away if you got it but bat down the hatches for winter yeah let’s uh let’s hope winter changes some perspectives on scrap flows and we we’ll be off to higher pricing sometime soon but not this yes sir yes sir all right man don’t uh don’t do anything I wouldn’t do between now and November 1st and we’ll uh see you in the great month of November where my favorite holiday comes to play Thanksgiving awesome well talk to you soon absolutely have a great uh rest of your month