A Scrap Life: Episode 104 | Chad Ellerbrock | BULLS vs. BEARS | July Edition

Brett and Chad are back for another Bulls vs Bears to discuss how the markets are looking for the rest of the season, demand is soft. Tune in to see where the numbers lie. Produced by Recycled Media. 01:33 Pig Iron Export, cfr New Orleans 06:11 Crude Steel Production 06:41 Steel Lead Times 08:19 US Midwest Domestic HRC 10:02 US Steel Imports 12:08 Shanghai Steel Rebar 13:36 Copper 15:05 LME Nickel 16:06 HMS 1&2 (80:20) US - origin CFR Turkey Consumer


welcome to a scrap life a podcast solely focused on the hustlers Grinders operators and business owners who live and breathe the scrap metal industry every day here is your host Brett eart all right another uh bus versus Bears podcast um Chad Eller Brock and I were just talking about inflation and how the cost of things has gone up over the years and uh you would think that the price of scrap would go up with the cost of inflation but maybe uh maybe that’s not going to be the case here in uh in July but maybe it is the case so I don’t know we let Chad do what Chad does and be the smart guy in the room and break this down for us so what’s up Chad well BR I wore my I wore my buddy hat today because uh after we talk about these seven bearish points and only not be buddies you can keep that buddy hat because we will not be friends if you give me seven be points without any bullish points no it’s it’s h it’s gonna be an interesting chat that’s for sure there’s a lot of

lot of mixed uh signals out there so hopefully we become smarter after this that’s the goal that’s the goal so let’s see if we can uh see if you can smarten me up man what are we looking at this month all right so I think I’m gonna start with the pig iron chart but I I add a little color add a little color to this one can you uh can you see it okay yeah I see it just fine all right so if you look at that black line that is pig iron pricing and if you look at uh the like the the dark blue line and the light blue line the dark blue line is bushling and the light blue line is Hot Roll so we’re looking at pig iron hot roll and bushling and if you look really since 22 I mean the correlation between hot roll the hot roll chars over here to the left on the pricing and then the the the um bushling pricing is over here to the right okay there’s just a very strong correlation right yep between these prices but if you look pig iron obviously

in CRA 22 went crazy but you know later half of 22 the second half you can see scrap and hot R pricing got crushed and pig iron went side like sideways even up now some of that’s cuz Ukraine Russian War still kind of lingering on and y y y but what I find interesting is right now we’re seeing that same kind of disparity where pound pricing is still hanging in there it’s actually up um I think like five or 10 bucks this month over a month and while well it looks like you know if hot rolls any future of any indicator it looks like scraps GNA be under pressure again this month but but in that but it just tells me like this Market it’s got to be a dog when when you see this kind of disconnection unless unless the the pig iron price turns up and drags I mean turns up in a dramatic fashion right and then has the ability to drag the rest of it because if you look at January 23 when it turned back up you know it dra it dragged everything else with it yeah and that

and I think this to me this is the real chart showing wow demand must be slowing down because that’s the only time this gets away you know okay so so you can look at this and say well this year isn’t so if you remember summer 22 we were all saying like there’s no flows this the scrap Market can’t go any lower and then it Go lower Ander and it went yeah and then lower ler yeah it peaked in May and we didn’t we literally didn’t get an up Market until December uh but just goes to show you like how important the demand side is of on the new steel you know the domestic new steel Market which I mean you can bring all the capacity on that you want right people are like oh capacity this capacity that and I think the future is bright but that doesn’t mean that the near term is super bright if just because you have capacity I mean yeah people are going to want to turn those things on they’re going to want to melt but at the end of the day they’re not they’re not doing it

you know they’re not doing at a loss which means if their price is down price of scrap is uh is is coming along right along with it yes so I mean when so tell me how are your flows our flows are actually pretty decent which is why this chart makes sense like you know I mean we’re not out here you know crushing it by any stretch imagination you know I don’t think we’re it’s like our flows are up year over-ear or anything like that but I mean relative to say a few months ago they’re they’re pretty good um you know and some of that for us just depends on like it’s job driven you know project driven but for us a lot of those projects are driven you know by time of year people that could you know when they can actually work and get stuff done kind of In the Heat of the construction season but you know the industrial flow as a whole I feel like is is a little bit soft which is which is almost more scary just because that means that the the demand side of the new

steel is soft so when you start seeing that you got to be You Gotta Be You know be ready to go because it’s the market is probably not going to do anything in your favor well you know what the old saying no one lives in a vacuum right like there are no islands and if your flows are good probably other people’s are too right and so I will say I’ve surveyed a lot of guys and and gals and I got a lot of mixed messaging um if flows are good or bad you know some I don’t know if they tell me the truth even if I some them you’re trying to buy scrap from so they’re like yeah it’s shitty but but that’s but I I just feel like this feels like summer of 22 where we’re like oh yeah this has got to be the bottom and then then it goes SL bit you know so the correlations there are funny to me so I thought this was a really good chart but but up next is kind of this is your bullish Point Brett you ready one bu you give me one

I’ll take it at this point I’ll take whatever I can get crude steel production it’s currently at 77% which um that that’s I mean they did decline 1 and a half% month over month but to me those are still healthy operating rates when you think about our our atmosphere we’re in right now okay so so that there’s your bullish point now let’s get back to the regularly scheduled beis program all right so let’s talk about lead times so you can see lead times and pricing on Hot Roll continues to like we talked about earlier hot rolls continues to fall I think it’s down 100 I think new’s index is down $110 month a month uh I I read something from warlington Steel Industries they were talking about how hey we see buyers remaining on the sidelines and they’re still destocking and and they think there’s more downside pressure so not not good and this lead Times shows that we’re right around three three to four weeks so and how long does that destocking process take I mean I mean out of curiosity in from your experience like how long or is that just a

nice way of saying like yeah we I don’t have any sales yeah well I think I think steel guys will speculate right if they sense a bottom and that’s why these lead times charts they can go from anytime you’re under like four or five weeks it’s it’s ugly anytime you’re over like six like when you see six eight weeks you’re like wow things are good right because Mills steel mills on the scrap side will adjust their inventories to match their orderbook so let’s say they are have eight-week lead times right they’re not afraid to go out and buy scrap and cover and kind of lock in that margin but on the on the reverse when when lead times are three weeks you really don’t want to have a lot on the ground because you usually that means the market is going down which usually means you want to keep your inventories lean too that makes sense yeah so and then you know like I said the new cores index was down $110 this one is this is the May Futures Market it slipped from 746 down to 684 and that’s a decrease of

8% this kind of goes along the lines of what we were talking about the other day we were talking about like the price of you know our steel pipe and I was kind like hey how is this reflective in you know um where the where the market is at and generally speaking I think if you are in the what I was having a conversation with somebody the other day and um it was yeah yesterday we were talking about buying buildings for storage units and I was like hey if you’re in the market to buy you know steel buildings you know this is probably if you’re if you have the the nuts to go do it with these this interest rate environment and you’ve got a good product and whatever I said you’re probably at a pretty good inflection point where you could count on if the new steel price does go a lot lower then there’s probably other bigger problems but you’re probably down there scraping along the bottom to where you could probably swing a pretty good deal right now so anybody that’s on the new steel buying side it feels like I

mean if you’ve got some demand or if you feel like you know you you’ve got a little risk in you the pricing is kind of bumping along that that area that could make sense you know yeah well this you go back to 23 this is where we bottom out and Hot Roll right around this you know sub 700 level so we’ll see I’ve heard deals as low as you know I guess I’ve been told I don’t know if they’re true or not some big deals at 6:30 Hot Roll so that’s that still says we got some ways to go yeah but but what’s Le what’s leading this is not only we got slow Automotive not only do we got slower construction not only do we got slower Industrials and you know Manufacturing in the United States we also got import pressure and and we continue to see these numbers just continue climb so you know for perspective steel parts are up 8% in um year to date and 5 and a half% so far through 2020 versus 2023 so and I think on this when I think about this chart I think about

I mean everybody’s Market’s different right and like in for a lot of the construction projects that we do it’s um say you know it’s a buy USA deal right um so you have to have products that are made in the United States people like well if that’s the case then the price shouldn’t be down but the the reality of it is is that it’s it’s the pressure on all the other projects you know any all the steel that’s coming in that yeah you you might protect some of your projects you might protect some of the steel but that doesn’t protect everything because there’s a lot of people just they just want the best price they don’t care whether it was made in USA or made wherever they’re like just I want the best price which then that’s where this pressure comes from y yeah and this is and you gotta think about it we’re we’re receiving these this much Imports year of year and that’s with a 25% tariff yeah so it’s pretty insane which that goes I mean to be honest it kind of goes to show you the resiliency of the dollar

right I mean you’re putting 25% which goes back to Dollar strength if you’re putting a 25% tariff on new steel and you’re still getting this much import pressure then that just goes to show you like you know every there’s a lot of weak currencies out there that still even with the 25% tariff and the shipping and the they’re like yep we’ll take we’ll take that deal um and from my understanding this chart doesn’t say it but is is a lot of that pressure coming from China yeah you got to assume so because here look here’s the steer rebar CH chart from Shanghai and this thing is just getting crushed it’s down it’s declined from 30 3500 to 3,300 Yen and so you can see this thing is it’s taking a beating over the past year and I just think this is just the real indication and I I think that’s why we’ seen the Chinese president come to San Francisco a few months back and said hey we we want to get along you know I think I think his their economy is hurting yeah especially their construction economy right I mean yeah

they they’re a GDP driven economy um which relies heavily on commercial and residential construction which obviously re rebar is a big big part of that which that kind of probably speaks to their construction economy as a whole and um there’s a reason why you know that that shit’s getting sent here I mean because the way CH the way China Works from buy understanding is they’re not going to sit out there and hand free checks to people to sit on the the sideline they’re like hey we’ve got work for you right we’re g to go make rebar we’re going to make XYZ and if you’re going to eat you’re going to work and we’ll worry about the ramifications of uh of moving that steel let just get it made just a crazy concept you gota gota you gotta work is it it is it’s I mean it’s amazing I didn’t even know that even existed but new something new every day all right well let’s keep let’s let’s keep laying these bare points on you this copper chart I mean you obviously I feel like you’re one of those guys who you know never never

falls in love with their scraps I’m sure you sold during this all but this is a quite an amazing chart here in the over the last 60 days yeah definitely I mean it’s it’s a kind of makes you wonder where the where the train goes from here right like you know you you could make a case that you know you’re starting to bottom out and you could get a higher high if you got a some sort of um momentum but where it feels like the momentum is on this trade is on the other side like the continued down the downward pressure towards four um feels more likely to me than back towards five yeah at least at least it might pause at four and a quarter but then have a Reflection Point there but yeah I’m with you we could see $4 after we get through that four four and a quarter Mark pretty quick especially if people start shorten it in a big way right I mean because part of what pushed it from say 450 to 520 was you know big bets on the upside and just roasting shorts day after day

and you know that that knife does cut both ways obviously you see I mean but it can it can come down in a hurry you know if it wants to yeah well I think so I’m G show you the nickel chart this one is even uglier so this this that my friends is why 304 stainless is 60 cents because you’re like jez yeah nickel’s down U it was right around 19,800 now it’s around 17,200 a decrease of close to 13% month over month so I mean to me this is a real big demand issue everybody I talked to on the stainless side and nichel side is just hey there’s just no Demand on the stainless side which is definitely pushing down nickel and um I know there’s a lot of talk about nickel and the battery scene but I think that that battery um ESP in the battery powered you know cars you starting to watch that loot take some air out of that balloon lately feels like as well yeah all right so I Sav The Best For Last this is a bull point you ready I can only imagine what

kind of you got for me now so uh the turkey 8020 price it it actually increased from three $379.00 up to 39030 that’s uh according to dat or excuse me this one’s Argus and that’s increase of 2.8% look at look at those numbers yeah man that’s a that that that should get you get you guys in the Midwest to have to pay up for some scrap before it goes to Turkey but but you can this chart is also shows you how thin the volumes are because if you look at the gray line or the light blue line those prices are continuing to come down and that’s because you know I always say if we’re talking about Bangladesh or you know some odd country to take scrap you know you know turkeyy is not in it so it’s not a good sign well and that’s kind of what uh what I’ve been hearing you know is that there’s really not a lot of demand from your big consumer so that the scraps going to like a couple small players there’s really not enough people at the auction to even drive the price right

so what’s What Hurts The Domestic Market is if I have to you know kind of sum it all up is you got a lot of Steel coming in on the import side you know you know creating creating uh issues you’ve got a strong dollar which that’s not going to help you on the export side and then you have limited export buyers so you limited people at the auction and decently decent spring flows coming off of you know April May June oh boy it’s a cocktail for positivity around here it’s just this sun dos that’s all that’s all come and go that’s the all I know is if you got some you might want to get rid of it or you might you might have to sit on that and let it rust for a while but we’ll see see what uh what it looks like but I do suggest I mean pay attention to the charts it’s not uh it’s not a lot of not a lot of positivity out there but you know just make sure you buy it right you know get your buy right it’s all you can do it’s all

you can do all right you want to leave these guys with any anything good anything anything good to sleep on at night or just a whole bunch of just a whole bunch of crap you know I I think at some point we’re going to come to that that asymmetric wrist reward where there’s less downside risk than upside you know I think on Hot Roll does that number is that 650 is that 630 is that 610 I don’t know right on scrap is that three you know I’m just generically speaking shredded is that 350 you know for bushling 350 320 300 I don’t know uh but at some point we’re not going to be able to buy it and it’s going to bottom so just have faith the markets always turn around they always turn but I will say this they can take longer than you think think they are they’re going to so I do suggest you keep keep it moving out there and uh don’t fall in love with that scrap it’s said it if you got a place and you got the money pile that up I think there’s GNA be there’s

gonna be your your time’s going to come but if it’s just you’re just run your Show run your business I suggest moving some material this month if you can if you got the right home for it I love it all right man thank you as always and uh hope everybody has a great month um and we we will see you next month it’ll be August I can’t believe it’s already July go America go celebrate America this this is the best time of year right now wave your flags red white and blue have some cocktails do some barbecues enjoy your time with your family and uh it’s GNA be a good be a good week happy 4th happy 4th of July everybody