all right welcome everybody we’re here with another metal Monday today we’ve got a special guest how are you doing John pretty good happy to be here ok if you just wanted to kind of introduce yourself and give us a quick background yeah sure I’ve been tracking you know the aluminum scrap an alloy in P 1020 markets for for Argus media for a little under five years now and so depending on the you know the day of the week it is I’m looking at a different angle of aluminum in the US and also some of the export markets so this is uh this has been a turbulent time and Monday is pretty much the only day of the week I’m not pricing something so uh this is the day that I get to catch my breath a little bit how did you get into the aluminum kind of into the scrap quasi scrap business via aluminum yeah well I got a I got a degree in communications with the focus and journalism from a university here in Houston University st. Thomas and I got into the energy trade publication world so I did well

and gas magazines so they need people who can who can write well to kind of translate all those engineering ideas and to you know readable interesting articles so I did that for a little bit and and then I got approached by Argus and if you don’t know Argus media is a price reporting agency this is just for anybody who’s listening you might not know us yeah and you know we’re kind of in the you know same group of companies is like you know Platts American metal market their competitors to us but anyway you know Argus’s main you know group of commodity is his energy stuff so there was overlap when I came in from the trade publication world but instead of going into oil and gas there was an opening in metals and I took it and there history I love it so thanks yeah it’s it’s a super dynamic always you know adds and flows I mean you get you know big runs you know big wins big losses it’s always just a interesting mark and aluminum seems lately have to have felt the pain as much or probably more than any you

know base metal commodity that that I did I’m in especially anything that I’m involved in so I mean yeah let you kind of touch on your specialty sure I mean I think the the easiest place to see it right now is you know with aluminum is uh you know the secondary aluminum market so you know people who make cast alloy it’s for mostly the automotive sector right now are probably hurting the most you got companies like real alloy and in a Missouri smelting technology that’s you know service Toyota those two guys are they’re mostly out of the market right now and so that leaves a lot of scrap dealers with you know not a lot of homes for their scrap I mean there’s there’s a lot of secondary smelters in the US but most of them are hobbling along right now some of them are making more than others but futures kind of uncertain at the moment and then the other side of the coin is you have the rolling mill scrap market so rod alloys sheet coil all that that market is kind of buoyed by increased consumption of you know canned food

products and beverage products right now I mean everybody home everybody buying stuff in bulk they’re seeing a little bit of an uptick in demand for for rigid body can sheet and other other you know packaging products but even they’re hurting cuz you know a lot of a lot of the investments they’ve made in the past several years about the past decade have been for automotive body sheets so really the entire aluminum market and you know the raw material side of it it’s all getting hit right now and we don’t really know I think the first automaker that’s going to come back into the market and you know we ramped up production again is supposedly still you know Volkswagen there they’re gonna come in next Monday that was the the preliminary date that they set and I think everybody else will come in after so it’s the Auto automotive issues have left a big hole in you know demand for aluminum right now words Volkswagen located at work they’ve I think they’re they’re big facility I think is in is in Tennessee but like a lot of the OEMs I mean I’m sure that they’re

they have little facilities strung out across the country but mostly Appalachian you know Midwest as far as the automotive side John I mean how big of a player are they in the aluminum as a whole I mean you you and this is just me for people a man’s terms is secondary mills secondary aluminum scrap is I mean from the automotive side is that a big driver of that price oh yeah you know it’s it’s easily I’ve heard ever different specific percentages when you ask like you know what part of the end market automotive is for secondary aluminum but it’s way more than half could be more than three-quarters kind of depends but uh you know there’s a lot of these secondary smelters they have known automotive accounts that they sell to but there’s just no replacing you know the automotive ones so that’s why it’s kind of tough is there a projected timeline so I say Volkswagen they’re looking at coming back you said next week yeah and so let’s say that I’d say perfect case scenario both line comes back next week and then the other two come back as a following

how long is it going to take projection just using like historical data how long is it going to take to kind of get that supply line started again get that consumption started again to where you might see some some supply side you know or demand side relief to where you the the demand might catch up with some of the supply that’s out there that’s a that’s a good question the only case study we have on this and I’ve only been doing this for like I said like around the past five years so I don’t have the longest of you but you know that’s all you more volume that’s not Prize winning just kind of like right got volume look like it’s it’s tough to say but I mean I think that you have you had like a mini example of this last year at the GM strike I mean there was a lot of disruption to the secondary aluminum world and they actually bounced back okay from that I mean there wasn’t any major bankruptcies in the smelting side as far as I know and I actually not even sure whether whether they’re any

major die caster ones but you know I think this one has been going on for just three weeks now I can’t remember how long the GM one was but I think they’re pretty close at this point in length but you know it’ll depend you know whether people extend the OEM to extend their outages more because originally you know right out of the gate a lot of them were like yeah we’ll be back like early to mid April and that that didn’t happen yeah and it’s probably the right thing for them to do I mean sadly it’s tough it’s tough decision but one of the one of the big secondaries that’s that’s not real Iowa according to a vendor letter I got from from somebody you know in late March they could be back in the market this week receiving scrap again one of the big ones that kind of serves automotive real alloy has not really indicated what they’re gonna do they’re still producing you know alloy for non automotive accounts you know diox but it’s all really up in the air at this point yeah it’s such a crazy time is there’s so

many variables there’s so many twists and turns there’s really no way of predicting you know the road you know it’s it’s super dynamic and I assume that I mean a lot of that keeps you on your toes as far as trying to figure out yeah there you know pricing could go where volumes could go I mean it’s such a I can see how that is I mean one decision today by the by the government can affect you know on to the next two weeks and we just we don’t know where that’s going yeah like here in in Texas where the governor has kind of started opening this date back up and it’s it’s a pretty slow process you know it’s nothing I think teleworking is still gonna be going on for a while but it’s so state-by-state that’s that’s the thing that’s tough and while a lot of secondary aluminum capacity and a lot of rolling capacity is consolidated in the Midwest there’s some in the southeast as well just kind of a patchwork there’s no it doesn’t sound like there’s gonna be any federal order just top down like we’re opening

everything up you know everybody’s got their own different responses so what else what is worth noting on the aluminum side I mean you’re so in touch with that market out there value-wise can we supply the recycling community that you know the service pay attention who’s interested in that market mean what what do you see in is there a you know anything else that’s really worth noting what’s going on yeah one thing that’s kind of interesting kind of switching gears and going back to the the rolling mill scrap again for a minute you know one of the things to note is is because of AB kovat the LME price has fallen you know for most base metals pretty low and then the physical metal premiums for aluminum in the u.s. you know the Midwest premium it’s also very low right now so what is the Midwest premium today Midwest premium for for us I think we have it at a at a midpoint of like 1010 and a half so it’s it’s very it’s it’s not historically low that’s kind of where it should be it should be 10 and lower without external

factors but obviously we’ve had quite the past couple years you know the 232 and all that driving it up but I think one of the things that’s interesting is and and I’m sure that it like all the all the dealers are noticing this you know some of these brokers took took some contract business you know they negotiated at the end of 2019 for 2020 the Midwest transaction price was at a certain level it was like I think it was like a dollar or above at the end of last year things move so quickly I always have to check myself so it’s way but now it’s you know now it’s uh it’s like it’s in this it’s in the 70s right now so basically if they you know they negotiate you know I’ll go and buy you know this many loads per month of painted siding for this one mill at 40 under let’s let’s say and and now with the LME so low the spreads for four spots grab sales have tightened because with the LME low the dealers want more money to be compensated so they you know they don’t lose their shirt

so those old spreads don’t quite work so there’s been kind of a supply crunch from from brokers on stuff like rolling mill scrap and UBC’s we might see some brokers be declaring force majeure on some of the ubc positions they took in 2019 I haven’t heard anything yet but I know some people who are sweating right now not necessarily everybody but you know everybody takes a certain amount of risk when they decide what kind of contract business they’re gonna do yeah if you if you’re really behind on your contract right now like it’s gonna be tough because again like say like you negotiated to I don’t know you’re gonna get paid a certain percent for you know the UBC is that you supply you know X number of loads if you try to go into the market and buy it that spread today you know and you haven’t tightened it up to reflect you know the tightness that’s going on right now with collections you know with Kovac keeping people from getting scrap into the yards etc yeah like people might laugh at you you know you’re not gonna necessarily be able to buy

against that and that’s an interesting phenomenon we’re seeing right now so yeah that is a you know I think a lot of people don’t you know a lot of smaller scrap facilities or whatever companies don’t understand how those the brokers work I mean they they’ll go in and position themselves like you said at the end of xix for all of 2020 at certain spreads on certain items for certain Mills commit to xml and there are years when it that’s a great thing to do alright and it’s usually when the market is flat to climb II when I when it’s volatile and and you get these big swings and it’s and and all the swings are down that puts you in a tough a tough position because you’ve already negotiated this spread and what we’ve heard too is that and this is like I guess really the the thing to watch and the thing that the reason why this might have a lot of consequences a lot of the rolling mills that the degree to that contract business at least one major one that that I I know of through a couple of brokers is

like not really willing to renegotiate those spreads to reflect today’s market because they’re like well you agreed to that like we agreed to outsource that risk to you you agreed to do it now we’re not gonna let you go back on it which is tough because it’s like that just means if you’re a broker to fill that contract you might have to lose money for a while which I mean in any contract business that happens you know you’re in the red a little bit some of the time and hopefully you’re in the black most of the time but you could be really really in the rich for a while on some of the stuff so yeah does it make sense for and this is just you know with you but does it make sense to to sit down with I mean if you’re you’ve been a consistent supplier to that really mil you’d have good con you have good contacts out there you’d have good suppliers does it make sense for them to at least sit back down at that table and say yeah we realize nobody saw this coming but we really worried

about 2021 as much as we in 2022 is we are at about 2020 I mean do we sit back down and try and find something that what’s the number gonna be that you can still get me the material I need to supply my rolling mill and keep pushing forward I think that I think that’s probably going to have to happen if we consider if we if we continue to have you know this kind of nationwide shutdown where you know retail scrap business is slow scrap collection is slow and then on top of that the spreads don’t make any sense because I mean you know the consumer can go like well you got to fulfill that contract order but if everybody declare swimmers ear becomes them the consumers problem again you know I mean dad they can take you to court later or like try to dispute it but at the end of the day they don’t have that scrap you know I got a question for you that are our customers and our retail traffic do you have a quick answer to why you see such a swing from like aluminum rim pricing to

like sheet aluminum you know a lot of people look at it and say hey this is all aluminum you know and we know there’s different commodities and we’ll educate our customer and explain it to them but can you can you explain that a little bit yeah I mean like just just how those different prices move like how one of them or why the different type of aluminum’s worth different values you know yeah and you know most of it is is basis its tool there’s two things the first one you know recovery the cleaner the cleaner it is less contamination the easier it is to melt without complications that’s that’s one and then secondly it depends on the kind of consumer you’re dealing with because you know secondary smelters you know they’ll buy go buy stuff basically availability is what kind of sets their price you know supply and demand and but then the rolling mills which they’re all big public companies for the most part they look at the Midwest transaction price for P 1020 and you know when that changes it’ll cause the you know their bids for scrap to change but if

you’re a secondary smelter you might like see the Midwest transaction price to do something and you’re like I don’t care you know yeah doesn’t concern me and and that’s why sometimes you see like weird weirdly wide ranges for old sheet because there are there are some rolling mills that buy old sheet but also secondaries buy it too and sometimes the the transaction price goes nuts and this you know rolling mills need it they might get real aggressive oh yeah its recovery and it’s who’s buying it really you know so as kind of a what role right now is the export market plane in this domestic aluminum market yeah that’s a good question yeah you have a couple of things happening in export right now that that’s interesting China and the people who are in the market still you know that they’re having are no longer being affected by Co vyd as much those people are finding that there’s not a lot of scrap in the US because of you know poor scale prices for ferrous scrap and just poor flows of it so those the export market is kind of realizing that to get

scrap from the US right now they got to increase their bids to get that so Zorba for example that’s going up but it’s interesting because you have some you know economies that are out of the market right now like India India is still in lockdown and they’re a pretty big determining factor in you know export pricing and they’re just they’re just totally out right now there’s a lot of no quoting going on because they’re trying to approach the co vid outbreak pretty aggressively and so right now you have a situation where China is pretty active in India is not very active and and then again you have that you know low availability of u.s. credible that go and make the zorba oh yeah for sure that also plays a big role in base metal pricing in general to you know what the LME is doing you’ll see the LME pop a little bit if the dollar goes a certain way if it weakens a lot but you know the export markets just a big it’s become it’s become very complicated but it’s uh you know for the most part the theme I guess

there is that you’d think that the exporters it would be totally a buyers market just because there are so many US consumers out but there’s also not a lot of scrap so it’s kind of a weird dynamic that I’ve noticed on my end is yeah the pricing is shitty at best but the there’s still demand for the scrap and and that being said like as a scrap you know as a scrap processors seller you know that at least leaves you there’s there is that positive because I’ve seen it where they owe a oh nine where there wasn’t even a market for it regardless let me tells you the price is when there’s no market there’s no consumption it doesn’t matter what the LME says I’d almost rather see the LME be low but there to be demand because that lease means you can negotiate just yeah you know I mean there is kind of that caveat from my from just from my perspective on the scrap seller head at least I’d rather see some consumption right and I think that the challenge is is finding who’s buying in this environment because they’re there there

are people who are buying it’s just a matter of people are responding to this crisis differently some people are taking longer shut down some people are trying to power through it it also depends like how much finished product inventory people have on the floor and what they think that their customers are gonna do but at this point like I said other than Volkswagen it looks like everybody is gonna wait till at least May to come back so it’s like it’s tough ya know it’s a super dynamic super challenging marketplace and I just want to thank you for taking the time out of your day and from your home office and just sitting down with us and I can’t wait I look forward to having you on the Avenue on here again and just kind of giving us yeah this is this this is fun and I I appreciate you guys doing this I like watching them keep keep posting them you know yeah yeah aluminum guy a good copper guy you know next we find the the nickel is especially our guy oh just keep building up the team and like this doing our

best to provide the people that are watching this a little bit more information I mean that’s all that’s all we get out of it you know we’re just trying to get a little smarter every day and hang gyrl smart people awesome well it was a pleasure talking with you guys and I’ll talk to you soon hey everyone you too thanks guys