hmm 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 eckhart all right another bulls versus bears podcast with my guy chad ellerbrock um this one might be a little bit more like i don’t because i think this is one of those ones where it could go either way or it could just not do so i’m happy to have you on the podcast again chad once a month for the rest of your career um scrap is a big time commitment i’m glad you signed that contract last week so we’re what’s going on man um you can tell i mean all my uh all my bearishness has been is been getting been beaten up i mean even even the sun is shining extra bright today to help i love it i love it well i mean you know even us giving us bowls in a down market we got to get a we got to squeak a day in

any time we can you know well i think i i mean i think this will be a good podcast because i got the few few points on the negative side a couple points in the positive side so we might we might have to actually figure something out here this could be a month where nothing changes and nothing burger it’s like uh groundhog day we’re like all right it it is it’s the same as all august but i don’t know i feel like there’s a little bit of optimism in the air and and probably not for the right reasons but most you know i feel like it’s more supply potentially supply driven you know the export pricing driven maybe trying to quote you domestic guys on us but we’ll see well it seems like you know the analogy of the steel mill is typically in charge i feel like this is one of those months where you know who’s uh whose mindset’s gonna be the stronger one will win so i like it i like it well fire us up i know you if i know you i know you have charts i know you’re

gonna explain to me why my case is wrong and yours is right so well let’s let’s just talk about i mean crude oil everybody knows the old analogy scrap fall is crude right and so month over month here we’re down we went from 98 and some change to 89 in some change down nine and a half percent what are your thoughts i feel like this chart um and i feel like crude in general i mean you saw a little bit of uh you know pricing action come down but i don’t know anybody right now that would bet that you’re gonna see you know 90 oil in the next you know few months i mean it could be i’m not i mean but i feel like that’s this chart price of oil only heads one way like in general i think it’s going to go up like it which is bullish for scratch if you’re in the octg market right but i mean we’re we’re not talking about december january when it gets cold we’re talking about september all right all right well i think it’s still boats positive all right and so our iron

ore is down eight and a half percent 114 some change down to 104. i feel like this is totally driven by china yeah not as not as uh this one is a little tougher to justify um and if and in general if people are paying attention to the news i don’t feel like china has been a uh um a bunch of positive uh reinforcement for the price of scrap either so i i’ll give you this one as well so this one could go i have a couple points in here so we got crude steel production in the u.s very very similar um year over year okay month over month we’re actually up about uh a percent so us-wise that’s good now global steel production is down six and a half percent i am curious how that looks even going into september because you’re starting to hear you know in the europe in europe you know they’re shutting down in your big major industrial production whether it’s aluminum plants zinc steel because of the cost of electricity and energy so how does this chart unfold at the end of the year you know

that’ll be it’ll be a little more it’ll be an interesting uh an interesting look but positively speaking it’s it’s good to see that as of at least you know right now the month over month year over year it’s it’s tracking that’s why so i i feel i agree with you what you’re saying in general but but also i think if you look at this chart and this is the hot roll uh hot roll us chart it’s down what down eight percent around 845 to 778 and to me when you’re thinking okay production you know steel production is sideways you know you generically should have fairly flat pricing right but it doesn’t and so to me with with the world being down six and a half percent and this price just completely down i i feel like when it comes to the world steel making or china and predominantly they’re i mean they’re the 800 pound gorilla right yeah i mean this just what the the thing about this chart what it shows you is that in my opinion the steel manufacturers are having to be a little bit more competitive they’re actually having to

compete for the business again right so yeah if you look at the production and you say okay month over month year over year it’s fairly in line but the price is coming down then that tells you okay they’re actually having to compete for the for the sale you know that’s the way i read it is okay if you want to do the same production you’re going to have to get your price down and get in line that and you’re getting export pressure um you know export pressure or i’m sorry you know import pressure what however you want however you want to say it but the imports coming in are kind of holding your feet to the fire um and whether that’s china or whoever it is they’re gonna you know make you kind of play ball what’s your thought i i mean did the steel mills get a a little out of the line on the margin i don’t know i mean a market to market right yeah yeah i mean i had a i had a pretty frank conversation um yesterday with the with one of the domestic steel guys and you know

i said just remember like you know the waste you know the scrap guys look at it is you know we have a pretty long memory and when when you guys are paying like just saying i’m gonna put this out there’s five ten dollars over the export price because i talked to a guy yesterday and he goes that looks like the market market you know should be up this month and i was like oh i said how do you figure that and he goes well i’m just looking at the export price and and and you know extra price came up 30 40 bucks blah blah blah you know over the last say two weeks and i was like and i said and that’s where you screwed up i said and that’s not just you but the steel mills in general and this is just my opinion but when you guys are printing money and you’re only paying five or ten dollars more than the export market because that’s all you have to pay but you can sell it for x i said that’s some short-term thinking in my book which most of your steel

mills are publicly traded short-term thinking companies i understand and if i was in their position i can’t argue and say that i i wouldn’t do what they did but the reality of it is if the export market ever does come back if the dollar ever does slow down then you’ve burned a lot of people and not burned them because you paid them five dollars more than they could get if they would export but they have long memories right like you got you think about that like if you basically said i don’t care you guys can make an extra 10 bucks but i’m gonna make an extra 1500 good luck you know i wish the best those are the same people that you need to supply you when the market is a competitive market and you’re sitting there arguing why they should sell you versus the export side why you should be the guy that buying this crap and i know what i’m you know i know what my position is going to be is okay well can you pay me five or ten dollars more than the export guy is this a relationship

business or is this you know like i know you guys are margins are tight now but you want you want to buy this crap but remember like when your margins were real wide and you gave me an extra five bucks you know anyways that’s my rank for the day well well i mean i understand what you’re saying but can you imagine if scrap would have got up to 1500 a ton what expectations would be now if the market had to come back down it would have been unbelievable yeah but do you can you imagine like if you would actually help your local supplier of scrap and gave him a thousand dollars a ton maybe not 1500 but it versus giving him 400 or 500 while you made 1500 or a thousand like can you imagine what if you just would have split the difference with them and said hey man we want you around and you could have that conversation but man we want you here when times are tight okay yeah yeah i mean and some will stay some won’t but can you imagine the bandwidth you could have you know made and

you could have actually created for them to keep supplying you in a market well okay but i and this goes back to an old scrap outage that i that i’ve heard several times is if the steel mill is making money the scrap guy’s happy scrap guys making money too you know and so i i don’t know if there’s anybody saying man you know 2021 was a crappy year in margins either in the steel or scrap business no no but it all goes back to the old saying that uh um pigs get fed and hogs get slaughtered yeah well i think yeah and there’s no doubt you’re gonna see i mean i think you’re seeing that on scrap side too right you’re gonna see when when you look at uh well first of all let’s talk about this chart you can see what you’re talking about the uh turkey pricing so this is a bear uh definitely a bullish point start of the month you know in august first 352 now around 396 400 bucks so that’s that’s up uh 12 and a half percent so that there’s something definitely to be said about export

that’s why i’m i’m i feel like this is going to be an interesting month because you got tread feed slowing you got export higher but you also got tremendous pressure on hot roll they i mean they try to go up 75 a ton the pricing did not work you know the price increase did not work actually went down down more so um oh this will be a fun month this is why this is this is why when it actually gets fun when there’s really no clear clear direction right and this is kind of when it gets when it comes back that comes back to um your relationships and you know making sure you take care of each other and which has nothing to do with the bulls versus bears on the surface but the reality of it is like you should be able to adjust your markets you know if you’re if you’re in the midwest and you only go domestic because that’s really you’re basically landlocked then you know you need to make sure that uh you know everybody’s taking care of each other um you know as far as the scrap supplier

versus the domestic mill consumer um but i do i do believe that export is going to put pressure on the domestic steel market and it is starting to a little bit this month and if you get any sort of decline in the dollar which is a whole nother conversation in itself if they keep it raising interest rates it’s going to be hard to see that dollar really get mushed um but i’m hopeful as a bull that the export market keeps putting pressure on the domestic market so that there is opportunity moving forward and i think that’s the you know on that point so if we look at the futures here market and both in europe and and in the us not not a lot of clear i mean it’s a lot of nothingness a lot a lot of sideways movements here so yeah um i i don’t like some things a lot of clarity but to me we’re already seeing aluminum foundries just shut down yeah we’ve seen a foundry uh in oregon this year or this month announced that they’re shutting the doors 100 what 20 years in business or something like that

i remember that right was it 100 and something years it’s crazy yeah and so and so if who knows what’s going to happen in the winter but but if europe starts getting low on some fuel you know natural gas oil i would think they’re going to come after the manufacturers first right i think they’re going to say hey we rather you not produce abc widget versus you know our our citizens not have heat so if that happens who knows what that effect’s going to happen but it’ll be interesting to see if these these numbers fly up because all sudden you can’t get it or is everything going to be so slow because the demand is that does the product holding the production kill the demand and it stays in line i don’t know yeah i think we’re in for another another interesting like and it probably goes back to the you know it there’s those you know supply demand conversations like what drives price right you know demand you know our lack of supply and you know vice but nobody ever enters into the equation like um zero degrees and we need the energy

for like it like throws a whole new twist for a supply demand like what’s more important right you know to the is it the the the nation’s economy and the ability to create jobs and they at the end of the day i mean i guess it’s important to be able to keep your family um warm in the evening but if you shut down the manufacturing job that allows you to pay the bill i mean what’s what’s more like was it the chicken before the egg or vice versa right like yeah are you gonna have to come back are you gonna subsidize the power or subsidize the jobs yeah i mean i don’t know it’s going to be an interesting uh dynamic for sure yeah and this is where i feel like when you think about substance you know government intervention we’ll call it you know i think in europe and the u.s when we went through covet i mean we we put the ultimate money bomb and we just gave people money our citizens china never did that uh china said hey we’re going to subsidize our our production basically you know the

producing of houses and now we’re seeing that real estate imbalance you know plus they have uh you know let’s just call it the difference of thinking with taiwan right and that that how are the citizens of the group that was a nice political wave i had a pause there i think about something okay so okay how do i say this yeah so you have you i mean you can see in there there there are still real bar pricing it continues lower a month over a month we’re down six percent and i think historically those when when you get i mean you can see in this chart i mean the prices were significantly higher during covert because they really they really i mean they put all their eggs in their basket and they’re in their investments in in their businesses and so they still a good thing is they still have that card they can always drop money on their citizens where maybe europe and the us can’t you know which i would say is probably a more effective way but but it will be interesting to see uh i just feel like the biggest

takeaway i had when i before i did these charts and after doing the charts was man there’s a lot of a lot of interesting things happening in china when i think about just how big they are i just think that that’s something you really really gotta yeah i think it’s something you have to i mean it’s something that you have to keep an eye on right it’s something you have to pay attention to and especially in on the scrap side because it’s and especially like you know on the west coast on the west side of the united states because potentially they can be huge consumers of scrap um whether it’s ferrous or non-ferrous and then and sometimes they can be huge importers of whatever to just kill the the domestic steel market right i think that’s why those tariffs with 232s and all stuff was put into place in general but um or at least that was one of the reasonings behind it but you know i think if you’re not paying attention to what’s going on in china and paying attention you know the rebar pricing and all that then you know

i think you’re not you’re coming only probably getting half the picture so that’s an interesting chart and you know if it goes i would like to see that chart stretched out like over a few years just to kind of get a better feel for what is what does that chart look like in say 2014-15 when the domestic market was you know pretty tough yeah and just to have some comparables but the trend isn’t isn’t really your friend on this one yeah but but also you got to think about tariff 232 since then you know so that if you go kind of before that it matters but there’s there’s been a there’s been a definitely a change in dynamics and honestly like i think china rebar pricing reflects the the economics as a whole as far as what they were kind of putting where they were putting their efforts but you have to think i mean china has also been fairly economically um depressed compared to you know previous years the last i would say a good solid you’re going on year two right i mean that’s it’s crazy like they’re only growing like

by six percent which in the us we would kill for that but that’s like wow you’re way down you were eight to ten you know yeah and so i mean i would have to think that that that’s a that’s a bull point in the fact that at some point they’re gonna juice this thing yeah you know at least or at least i mean you’re seeing them right they’re already everybody else is raising rates and they’re actually taking their rates down even if it’s a quarter even if it’s point you know even if it’s 10 even if it’s 10 points it’s still they’re they’re they’re they’re taking their rates down everybody else is uh pushing the interest rates up that which tells you that their their their mindset is around growth still and how do we promote growth not like in the united states we’re trying to create uh what the hell was the word i saw this morning and the headline was uh oh um that was something a growth recession or something growth uh what that was like some sort of like like a backdoor way of saying we’re trying to kill the

drill here i’m trying to slow this thing down something fierce from dovish to hawkish that’s all i know yeah exactly so uh one one thing i would you know this this isn’t going to help uh help my my friendship with a lot of the scrap folks but so on traffic uh we we went down went from 153 to 140 in that so margin compression man the market went down more than 13 in that time last month however on a percentage basis it’s only eight and a half percent so i made what are your thoughts on that well i think aluminum’s played a role in that i think some of your non-ferrous your copper but those are fairly flat month over month you know they’re like copper is up i think five or six maybe you know it’s within a ten cent range uh aluminum’s within a five cent range i mean it’s in such the volatile markets we’ve had i mean it’s been fairly flat yeah i mean and i know like even over here on the west in the northwest i mean they’re talking shredder prices you know potentially up this month

and i i believe it’s like anything right like you’re gonna push the market down and push until you reach the point where you you’re not buying anything right yeah then it’s like okay we’ve we went far enough like we’ve hit the spot so is that what’s happening right now you know i’ve have they have they have as the as the scrap processor you know shredder you know has the shredders pushed it far enough to where they’re like okay we probably need to you know see if we can raise the price and maybe buy some more or are they truly having a problem you know finding a home for the shredded you know i don’t know i don’t i don’t know the answer that question i don’t own a shredder but i’ve been a part of this downhill slide you know on as a as a pro as a you know a scrap seller i i know this feeling and it’s and it’s came down significantly and it’s it makes it tight because most people are going to have on your location you know depending on you know how far you are from a shredder

anywhere from 20 to 50 bucks and moving the to the shredder right now maybe 10 on the downside if you’re pretty close but i mean you start pushing that number down much further especially for remote scrap scrap starts to become super localized right like people can’t reach out as far and get tons and all of a sudden now it becomes a very localized market which then you know only allows you to take in so many times um and then if the tons if the price is low your tons become significantly reduced because you know your your area is has significantly strength so either you got to figure out how to get by on less or get the price up so you can kind of reach out a little farther and to that point you know we’re looking at the yield factors about when you when you think about and look this is generic i’m just using chicago amm pricing with a very you know industrial 88 percent yield on auto shred yeah if you if you bring that out it’s like 495 494 or busheling at 95 percent yield you know chicago a mm

pricing it’s at 426. and so i mean to your point we can see that it’s they i feel like we’ve beaten shred feed up so much that it’s actually not making sense on a yield basis and that’s why strata just hanging hanging hanging right in there it’s gonna be interesting to see uh you know i look at this chart i think from steel mill guy i gotta be i gotta be changing my mindset and what my student guy you’re trying to buy turnings right yeah turn turn but now but you can only buy those if these guys are slow right and so you can’t you can’t set records on production if you’re buying attorneys but right now with marginal compression i mean there’s an opportunity there yeah definitely i mean there’s definitely something there but yeah i mean ultimately i think this bodes bodes pretty well for the hms guys right and there’s guys i mean i mean at least gives you and that price the hms prices is is not great but it’s all perspective i mean two years ago you know that price looks pretty appetizing um today’s market after you you

know you saw some some four mid four numbers high fours like you started looking at 3 30 and like ugh but in general i mean it’s it’s it’s still it’s still fairly workable yeah and this is one chart i don’t usually share but but i felt like it was worth it so this is the u.s midwest bushling futures contract for december okay and i mean look at this thing there was people that bought and sold this contract in the 800s 815 today it was got as low as you know 460 today we’re at 495. so when you think about that yield factor and you think hey there’s a 60 70 opportunity there depending on the the melt mix are the melts yields and all that right yeah there’s a there’s a let’s call it 50 to 70 opportunity there and then if you look at the futures market i mean we’re up we’re kind of up that you know and so uh from now to december so it’s interesting how those two are actually uh making a lot of sense well i mean i don’t i wouldn’t want to be the guy that

that bought the futures contract but i sure wouldn’t mind being the guy that sold it i mean so especially so explain that to you know the the guy listening that’s trying to understand um where you the the bridge you just made from the previous chart which yeah so this one just so people have an understanding of how you’re looking at it yeah so the the the bushing futures contract i think it’s selling like i don’t know i’ll make a number up let’s say 405 415 so we’re in that range right for august okay and so if you want to go and say hey you know what i feel like the market you know i don’t want to lay down a whole bunch of scrap but i but i have i’m compelled that the bushing market will be higher in december you could say okay well what’s the what’s the bushling futures market price today well it’s 4.95 okay you’re gonna say well that’s like you know 70 80 bucks higher than we are what we sell that in august so that’s a fairly bullish point right but then you say man i started

looking at data and that thing was as high as eight 15 like holy mackerel like that that’s that’s quite the road like you said i’d love to be the guy that sold at that but some people were commanding that price yeah i mean they’re actually selling the physical good i mean versus even just a future contract like yeah i heard you know numbers out there that were breaching that and looking and it was i mean it’s a it’s a real it was a realistic number when we yeah no stimulus lost their minds when uh ukraine rushed the deal happened right when you don’t have pig iron you got to figure it out and so obviously they did but but but when i’m looking at the yields i’m saying look over shredded is overpriced by 50 to 70 a ton compared to bushling and today in august market so if we can’t push thread feed you know every every every scrap dealer is saying hey blows your flows are down and this is the bottom the last 90 days right uh then okay at some point they’re gonna at some point it’s going to be

true and flows are going to slow down and so when that happens you know you would say just on a melt mix you’d say well even if shredded stayed flat i’d much rather i could pay fifty dollars a ton more for bushling and kneel really kind of the same you know yeah and and so why wouldn’t i do that because it’s faster you know in in production wise and so that’s where i think okay that’s when i look at these this is something i’m always trying to connect and say what is what is the futures telling us what’s worth it telling us which which makes sense so i just want to hear you explain that so people can understand like when you’re talking about yield factor you talk about the price you know the shredded price and and basically just trying to understand it from say a consumer standpoint is why those prices move around like they do and some of it has to do with like oh we’re not gonna be able to get pig iron or you know bushling’s more plentiful and and i feel like if manufacturing slows down all of

a sudden all this bushling scrap that’s available you know is becomes less plentiful which then in turn has a has a positive impact on shredded scrap because all of a sudden you you need the material and then that bushlane isn’t available so i guess if you did lay some down and you were able to ride out the downturn because there isn’t as much manufacturing scrap available you either you can hit a good lick on it and and get the increase or it makes the turns and makes the shredders again profitable because if they can actually get the material too processed to shred that should actually give some love to the shredded market because there just isn’t the the volume of bush available right yeah yeah but and because i’ve heard rebar mills are now interested in bushling that that that does not need to happen yeah which then all of a sudden man that creates like an arbitrage like if you’re you know all of a sudden you got it it goes back like this and i’ve always said this is to me it’s like this is the most basic way to explain the

price of scrap right is it’s like having an auction and i’ve said i think i’ve said on this podcast before like you need two p you only need two people at the auction to get a better price if you got one you’re screwed right if you got four even better four people that want to buy it now you’re cooking with grease right but you at least gotta have two so if you’ve got rebar mills trying to buy bushlane because of the yield factor and the price arbitrage and you’ve got you’re just traditional consumers all of a sudden you are cooking with grease you’ve got something that some people that more than one person wants so more than one person can consume so that’s like scrap 101 right i need at least two so me being a guy that can send it to the export market or send domestically like it really is in my my benefit to have the export market in the game fairly strong being competitive is all of a sudden now it puts two people in the auction i love it so that’s a that’s a great great analogy and that

you know for the folks that haven’t been in the business for a long time they’ll definitely appreciate that overall i feel like what we’ve debated was and that’s what this well mostly the september debate will be was will be is right now the market doesn’t feel great because of a man it feels wobbly but in the future scrap sure does feel like it could be good could be yeah you know no it’s something there’s a percent agree yeah yeah you get the nail on the head yeah right there that was that was our chat too september is you know i feel like you know like the kid that learns how to ski and you’re like you know kind of like wobbling like you’re about to wreck but you may actually ride that thing out like be okay like i feel like we’re that kid that’s like going down the mountain and it’s like it’s starting to get real sideways and the guy on the side is like french fry french fry pizza pizza pizza like slow yourself down you know that’s where i feel uh this thing’s at for september but on the positive

side export market is you know keeping the domestic guys honest but the reality of it is like if you don’t have a home for your scrap it doesn’t really matter like you can said you somebody can tell you the price of a thousand dollars they’ll pay a thousand dollars a ton i just don’t want to buy any this month i think it doesn’t really matter like what the price is if you’re not willing to buy any right and i think by grade by region that’s going to be this month there’s going to be typical mills that are not consuming scrap or consuming less and like i said you need two people at the party otherwise i’ll be at the auction otherwise it ain’t no fun you’re gonna be cheering yourself you know all right man always great to talk and uh appreciate you and we’ll do this again we’ll do this again next month enjoyed it thank you all right talk to you there