foreign 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 we are the original recyclers no suits required just guts and hard work here is your host brett eckhart all right guys i’m back with chad eller brock uh to do the bulls versus bears um last month i felt like i had a pretty strong case on the bullish side um this month it’ll be a little bit more interesting this there might be a there might be a real 50 50 uh legitimate conversation here about which way this thing could go um as always um chad is uh ready to go and he’s got some information to share this time from on a slide show so we’ll put some slides up if you guys are watching this video if not you just listen and we’ll do our best to describe it but uh chad welcome to the last month of uh 21 let’s see what let’s see what this month’s gonna bring us bulls versus bears man i love it i’m excited so i feel like historically december

is usually kind of a mute point right like it’s usually just november market does what it does and then december just kind of follows flat market i mean what do you what do you think historically what is what does december mean to you i think a lot of it has to do with um the market in the preceding months so i come from a small business perspective i come from and and i and i was you know we were partners with center steel for almost 20 years and and their fiscal year just like our fiscal year ended in um august august 30th so there was always a different mix of you know versus going into december because it was just basically the kind of middle of the year for us um financially but now that we’re on a true calendar year and knowing and discussing and talking to other people that work off true calendar years it kind of has the feeling of what did you do for the previous 11 months what do you think the books are going to look like financially are you wanting to carry a bunch of inventory into

the end of the year are you have you made good money are you you know you want to book a bunch of profit or book a bunch of tons or are you trying to pretty up the books you know so so the banks will like you going into the next year for renewals i mean i feel like all those factors play a role even taking out a consideration like what the economy is doing with scraps doing so when in my mind when i think about it those are kind of some of the first initial thoughts that go through my head i i can’t uh i gotta agree i mean you’ve seen more markets than i have but i feel like in today’s world we’re much more financially driven you know uh cfos are much more in control than they have been in the past from what i hear and it feels like you know the market makers being the largest steel mills are are in that bucket right so they are they got to be thinking about all those things too so it’s great well now i mean you have to take into consideration

some of your larger you know steel maker manufacturers and medium-sized steel mills i mean they’re buying up you know scrap producing facilities right so it’s like they kind of have the ying and the aim to balance to a certain extent yeah and scrap moving i mean it’s one thing to get it in it’s only another thing to get it back out and process so especially right now yeah well what do you what tell me about your flows are they been okay similar honestly the flows have been you know okay i i wouldn’t say that they’ve been bad i wouldn’t say that they’ve been you know amazing um certain yards depends on certain areas flow better than others this time of year we’re very weather dependent you know as far as whether it gets super hot or super cold snowy icy thankfully this year it’s been uh you know the weather’s been pretty good to us we haven’t had a bunch of snow in in the valley so it’s you know we’ve been able to move and do but um the flow has just been you know on a one to ten five being

average maybe a five or a six oh man you’re embarrassed you’re supposed to say like four or five i mean come on so i wanna i wanna i wanna share you know i got uh something that i do track and the best scrap ever uh monthly scrap factors is is steel uh scrap shutter feed can you see it can you see it by chance yes sir yeah so i feel like you know we’re looking at this chart this is tracked on the amm and and they’re just calling around and getting shred feed prices and so if we look at this they’re up 11.71 so when you look at a percentage basis i mean auto shred in chicago was up like 12 13 so i feel like it’s in line i don’t necessarily feel like it being up to four percent is just kind of chasing last month’s price but you know i was surprised when i seen this chart i felt like it would be up higher than what the actual auto shred market was on the finish side just because uh just because it seems like flows you know like i said

are are average so yeah it feels like that i mean and i think that the reason it should feel like it it would be higher in my opinion is because it’s the margins the historical margins between finished shred and hot roll cold roll they’re still i mean significant right and i think you know when you’re looking at it from a scrap standpoint like i am and you’re saying okay like this market technically could be significantly higher um just based off finished good pricing um and that feels like it’s kind of flattening out to coming down so i think yeah i think that’s a bear case right i mean august uh shout out to jennifer betts and all the folks at argus i feel like they just had an article today talking about sales on hot roll a short time or 1820 to 1835 but they’ve heard offers as low as 1760 you know as high as 1840 in the past in the past week or so so to me whenever you see a bigger range on any any commodity whether it’s hot roll scrap you know widgets that means there’s some there’s some holes

and i feel like some of these steel mills are experiencing not holes but like i think some of these hot roll i think historically especially this past year seems like lead times have been way over six weeks right and right now for the first time they’re like at four or five and actually i’ll uh let’s see what to do i do have a chart i think it’s it’s worth looking at to that’s that talks just about that point uh so if you like i mean you can see here i mean this is i think argus is the only one that tracks the lead times i love this chart um and and you can see i mean the trend isn’t you know it’s it’s generally down it’s not not going the other way right and i’m noticing that even on the steel pipe side you know we have a steel pipe business i’m noticing those lead times shrinking up a little bit probably being able to get delivered you know a little bit quicker um on the steel side so i’m feeling like that that margin there’s that this deal goes two ways that margin

gets compressed or they try and drag the scrap price down with it um in order to save save as much margin as possible i feel like the advantage the bowl case for scrap in december is the preceding 11 months have been pretty good financially for um most recycling companies and if if unless you’re really trying to put some more profit on the books or finish the year strong to make your banker happy or whatever that that entails i feel like that number is going to have to be aggressive the number is going to have to be good because i don’t feel like companies want to book that that profit today if they don’t have to now um some conversations i had said hey if the number’s good i’d be a fool to not just to not sell right but if you’re just going to pay taxes on it you’re going to take 30 off the top what’s the point not knowing that what 22 brings um and all the kind of uh you know the ups and downs that we’ve been experiencing the last couple weeks you know people might want to you know

keep a little bit of powder dry yeah i think i think that’s going to be one of the the key drivers is is you know just the seasonality of all decembers is ours our suppliers vendors are going to take some i mean look if you’ve ran well and you’ve made a lot of money making you want to run even more i mean i think maintenance on on equipment around these holidays july and then you know christmas or there are definitely two things that you want to you want to think about so correct correct so i’m i mean i want to touch on your point though about the decouplization between hot roll and in scrap right so the steel male ceos have all said like hey we’ve we’ve officially decoupled from scrap right like there’s this huge margin and so we can’t expect you know if they if the steel mills expand the way up the idea is that they’ll they can’t really if it’s the couple on the way up it has to couple on the way down right like they can’t be cool i was just gonna say that like i was going

to say hey the couple all you want to on on both sides like i don’t want to decouple all of a sudden oh now we’re going to move in line right like the couple on the upside hey make your money if you think you can get away with it by all means you know get her done but don’t don’t tell me that line of oh now we have to follow the scrap prize on the way down no no and i think i think the really what what we’re i mean what with the steel mill talking about is the it’s decoupled from hot roll but i don’t think and this is where you push back and so if we look at this chart right this is pig iron export uh new orleans right and so this is from um this is from davis actually and this is a great charter show it’s not off a lot right but it is off i think around eight bucks a ton so i think five 80ish to 570 whatever whatever those numbers are but but i feel like when hot roll gets some pressure i think it it

leads to putting pressure on some of the scrap substitutes which could put pressure on scrap so i mean what are your i mean that’s my bearer’s case right so what i mean i have no doubt i have no doubt in a more traditional market that that’s correct but what we’re witnessing what we’ve been a part of for the last you know 12 to 16 you know months has been a non-traditional market we’ve really been you know it’s decoupled from the you know the price of new steel on the scrap side and because we are just an input commodity um so i i do feel like it’s gonna really come back to supply demand people talk about flows i’ve you know i talked to steel mill buyers regularly and one of their first question is how’s clothes looking for you so when you ask me that question i know that you’re curious because if flow’s not good you’re trying to plan for this month next month you’re trying to get ahead of it and say okay we know we have good margin and if we have good margin then and we know that our

suppliers flow is okay it’s slowing down we better be willing and we better project forward a tighter margin if we still want especially if our order books are strong in order to keep supply where it needs to be then we better you know we better project a tighter margin internally because that’s the way it’s going to be if we’re going to if we’re going to be able to buy i think i mean i’ve had one of my mentors say you know scrap is elastic right so just like your economic class the more you pay the more scrap you get the less you pay the less crap there is right and so i i can’t argue that logic it just feels like on the bare side or on this crowd substitute side if those grades become available and i think we even see it now where where substitutes don’t aren’t necessarily readily available certain facilities go down and that affects the bushlink market that affects the shredded market so i i i on the bare side feel like it has more impact than what the typical trader or typical person in the market you know

lends it to me so how much of an impact on the very side do you think that uh let’s say a strengthening dollar going into 2022 is gonna have if let’s say we get a uh let’s say we get you know some potential projected um interest rate increases and you know that that adds a little uh push to the dollar how much of a bearish impact do you think that’s going to have on crisis crap well john powell said yesterday right we are officially retiring the word transitory right so i mean he’s given up on the transitory talk so what does that mean and i think to me talk to to talk about the impact on currencies or what that could do is is throw you know i would say that’s going to be a lesser impact what if like these 232 bills change right what if these import tariffs change what if uh scraps you know pig iron substitute big iron uh tariff change in russia those are things no one knows right it’s hard to predict but i think that’s the bigger question currencies could it could be changing but but if

these tariffs change that’s when no one knows that’s going to be the the wild cards for it feels like currency is the big ball that maybe people pay attention to but there’s all the little ones that can have a much bigger impact you know kurt you know i i feel uh or i should say currency more interest rate interest people are really paying attention interest rate trying to project forward versus uh like you said the 232s you know the the tariffs and everything else is going on those could have a potential you know more impactful on the short term you know the long term impacts is you know steel mills putting in you know the transition to eaf furnaces right and really big heavy scrap consuming steel mills um if as they transition on a more longer term you know perspective whether that’s china whether that steel mill is here in the u.s if we become very more very much more scrap intense uh as far as from a consumption standpoint then i really feel like that’s super bullish more long-term driven but definitely bullish for scrap in general yeah and and

look i’m not gonna disagree with you but for december i feel like the new mill is coming online i’ve heard that a lot of reddicker rot a lot already i talked about the summer market but i don’t know if that i mean what do you think i don’t think the new bill is connected it’s not going to have any impact this next couple days yeah no january february march we’ll we’ll be talking about that no doubt but but not in december no december it’s gonna be in my opinion is who who needs to sell who wants to sell and uh um what steel mill is willing to pay for it because that to me feels like the driver i don’t feel like a bunch of tons are gonna come off the sideline at you know down money or you know sideways money there you go all right i’m gonna i’m gonna shift gears with you i’ve seen you share a lot about oil in the past so you know here we are crude off crude oil futures i mean they’re down what is about the 15 month of a month uh what do you

think does that have does that even play into december trading or is that just kind of a macro trend i mean you can probably make the cases they shouldn’t have got to 80 in the first place at least that quick i feel like it’s going to 80 and i feel like it’s going higher you know um it’s it not becomes back that goes back to supply demand issue you know you you choke supply and the demand still exists i mean that’s why that price is going to go um the demand for oil is not going away there’s not enough e v vehicles that are going to come online that are going to you know take take away the demand for oil and all you do is choke and supply with the current administration you’re you’re choking your supply down which you’re just making oil more expensive and that’s a straight-up supply to man deal so does that how does that play on the price of scrap in december i don’t think it does but maybe moving into 2022 it might play a small role all right i like it i appreciate your feedback

there so i’m going to shift gears once again here and talk about nickel so i know nothing really how this could impact our scrap metal but but you could because you you operate a yard right so yeah so we’ve seen nickel really take off here in throughout the month of november you know looking at the straw what do you what what what kind of thoughts do you bring bring to the table when that when you see that chart you know i see i mean the price of nickel coming up that’s good for the price of stainless right any of your uh high temp grades or you know just your basic 304s you know 316s which were you know very you know iron and steel intense um so i’ve watched our stainless you know our sell pricing on 304 stainless you know remain strong um uh so i feel that that the nickel price i i i mentioned before i listen to a guy named matt watson who’s very in tune with uh nickels almost becoming a battery metal right like it’s it’s being watched and being grouped into the cobalts and the uh you

know those those metals very heavily because nickel is is used in that process so if they truly keep pushing the electric vehicles as hard as they are you i can you can see that price of nickel you know climb substantially if the economy hangs on you know as a as a ferris buyer knowing nothing about that market historically anytime i see i’m not necessarily nickel but definitely copper whenever time you see aluminum copper spike it feels like the real small yards right they can sell some of the copper they had at the yard and that gets them enough cash to really maybe want to hang on or the option to hang on the cash flows to hang on to some some of their fairest grades so that’s what i always think about but yeah which i i i know that all too well so i guess that’s a great great point and it’s funny how it all still comes back down to like when you start getting towards the end of the year i feel like the uh in a good year i feel like your your scrap processors are in the driver’s seat

right come november december in a tough year i feel like steel consumers are in the driver’s seat because they’re able to kind of say oh you need to finish your gear strong you better you know book the times and so you know it’s it’s it’s kind of funny and and because i operated excuse me so many years for uh in a company that our fiscal year ended august 30th like i never really felt those dynamics right i just sold when it made sense and i moved move scrap um but uh i could definitely see where you know this whole end of the year um the last few years i can see where this dynamic is really taking place well it feels like we’ve looked at a lot of data points we looked at a lot of charts but but ultimately i feel like you know your point right there is is really what it all comes down to everybody it’s going to be very regional everyone every vendor is going to be in their own spot every steel mill is being a spot you know are they financially driven or not and so yeah

it’ll be an interesting market you know what i think chad it’s gonna come down to how well the buyers know their customer like you know i really feel that do you know the position your customers in do you have that relationship this is a relationship month right if you’re a steel mill and you need iron and you got to know your customer well enough to know say hey you may not need to book these profits or whatever the case may be but i could use the units or vice versa you got to know that that customer is in a good spot or not and this is like i feel like december you know christmas gifts bottles of whiskey or cinnamon rolls or whatever your flavor of choice is this is the relationship month oh man i love it well i think the steel mills they got the you know if they got enough scrap to to deal with less scrap coming in or not that’s going to be the question too on the consumer side and i think that’s way too early to tell so what uh what a great time i really appreciate

you looking out over these charts and giving me your perspective is that’s fun i love it man i i i look this is what i look forward to now now that now that we’re getting them on the books they’re like this is i don’t see us ending this one anytime soon that’s fine well i if uh we’ll i’ll send you a link for uh from the blog post if you want if your viewers want to see it you can link it up in in the podcast notes yeah it’s fun yeah we’ll put it on there have a good december chat and uh we’ll be back in january all right thanks brad all right man take care adios you