Welcome to “A Scrap Life”, a podcast dedicated to the hustlers, grinders, operators, and business owners who live and breathe the scrap metal industry every day. Here’s your host, Brett!

Brett: Welcome to the September 2024 edition of “Bulls vs. Bears.” I’ve got Chad Ellerbrock with me today. We’re going to talk about the current state of the scrap market, which feels a lot like the 2015 election year—a “death by a thousand cuts” kind of situation. I’m hopeful, but I know for a fact that September’s going to be tough for those of us processing and selling scrap. Chad, what’s going on, man?

Chad: You know, Brett, this is one of the first times ever I’ve got more bull points than bear points—eight bull points and just two bear points. But none of them seem to matter. The market’s still going down. All these bull points don’t mean much. But we’re going to do this anyway!

Brett: Alright, man. As much as I’d love to hear all those bull points, I guess it’s like spitting into the wind, right? Let’s see what you’ve got.

Chad: Let’s jump into it. First up, the Dow Jones—it’s looking great, at all-time highs, up 2.5% month-over-month. Consumer confidence is similar to what it was pre-COVID, and inflation, if you ignore some false expectations, is still above 10%. But the government says we’re closing in on a 4.1% mark, with a 75% chance of rate cuts in late September.

Brett: Usually, rate cuts are bullish for the economy. Could it lead to some pent-up demand on the scrap side?

Chad: Maybe, but I’m not feeling it. Crude steel production rates are at an all-time high for the year at 80.2%, which sounds good, right? Lead times went up to six weeks, but then dropped to four and a half. Steel prices have also risen 11% month-over-month.

Brett: Yeah, but those margins aren’t what they used to be. No one’s out there buying yachts anymore like they were in 2022!

Chad: Exactly. If you didn’t know anything about the scrap market and only looked at the data, you’d think it was doing pretty well. But here’s the big black cloud: the mill outages. We’re looking at 1.5 million tons of steel production being taken offline between now and November.

Brett: That’s like Nucor not buying for a whole month. It’s going to affect demand big time. Do you think they’re doing this to drive prices down, or just getting maintenance done in preparation for a market rebound?

Chad: Maybe both. Steel dude on Twitter said something interesting about this. According to him, U.S. mills are reducing output to prevent prices from declining further. It means less scrap demand, and the volume of scrap procured by electric arc mills will shrink over the next four to six weeks.

Brett: Sounds like we’re seeing a repeat of 2022. Prices kept dropping all summer, even when everyone thought we’d hit the bottom.

Chad: Yep. And now, we’re back down again. We’ve had a few months of sideways movement, and now it’s looking like another downward trend. Export demand is also getting crushed, especially in Turkey. Prices there have dropped from $392 to $370, and we’re not seeing much movement off the coast.

Brett: Why is that happening?

Chad: China. They’re dumping steel all over the world, from India to Turkey, Taiwan, and even the U.S. It’s driving prices down everywhere.

Brett: The impact of that is huge, especially for domestic mills. Even though we’ve got tariffs in place, the flood of cheap steel from China is still affecting us.

Chad: Exactly. And while some argue tariffs drive up inflation, there’s also the argument that we need to protect domestic industries. It’s something to think about, especially with the upcoming election.

Brett: At the end of the day, it doesn’t matter how good the stats are if we can’t stop cheap steel from coming in. Even our own tariffs can’t fully prevent the market from being saturated.

Chad: That’s right. It’s a rising tide lifts all boats, but the opposite is true—a good storm can sink a lot of ships. And right now, we’re in a storm.

Brett: So, what do we do from here?

Chad: We’ve got to keep an eye on the rate cuts in September. If they happen, we might see a bounce, but if the economy continues to struggle, it’s going to be a rough few months. If you’ve got scrap to move, it might not be a bad idea to do it now, because things could get worse.

Brett: Exactly. Election years are unpredictable, and this one feels a lot like 2015. It never hurts to have some cash in the bank just in case.

Chad: Agreed. We’ve got to keep watching the markets, and hopefully, things will turn around by the end of the year. But for now, it’s best to stay cautious.

Brett: Thanks, Chad. Always appreciate the insight. As always, this podcast is here to give you something to think about as you manage your scrap. Take care, everyone, and enjoy your weekend!