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 we’re back everybody bulls versus bears i don’t even know this is number four maybe um three or four i’m guessing yeah that sounds about right i got chad ellerbrock with me and uh once again he is presenting the bear case as a buyer i’m presenting the bowl case as a seller um two good buddies going at it i mean i we don’t get too too uh too riled up at each other but it’s always a fun to hear somebody else’s perspective as i’m trying to push the price up so fire us off chad all right well what do you think should we start with the bulls or should we start with the bears today you know i’m good either way you know like a little plug for what you got cooking though the best scrap ever um if you guys haven’t came in and

checked out that report went to the website i mean chad puts it together monthly it’s it’s a good you know kind of overall economic scenario because it kind of gives you not just scrap but just kind of what’s going on the economy what’s what’s more a new steel kind of a probably a clearer overall picture of where we’re getting the bulls versus bears case so real quick go check it out if you and that kind of give you some guidance on what we’re talking about this month so all right you go first chad all right and i would say was surprisingly enough when i did this report you know so i’ve been gathering this information for years and so there’s very few times where like i’ll feel compelled either bearish or bullish and it changes my mind and i i’ve i felt like for the for first time a long time doing this information changed my opinion so well uh let’s dive into it so let’s start with let’s start with the bears because the bears are always better right so i mean it feels like as a pretty as a kind of a

pre-function where you’re going to go it feels does it feel like there’s a general overall negativity not just in scrap but negativity in the stock market and the economy kind of start out 2022 that i didn’t really anticipate are you feeling that as well yeah i mean i mean you look at the dow and jones industrial average i mean january was a bloodbath not not not a little way you know it was it was a quick bloodbath and i think i think everybody late december felt like okay this is this 22 2022 would be a good year and then yeah like especially growth stocks just got completely crushed you know and so you know i i didn’t expect that that’s for sure which isn’t all bad for commodities because um sometimes and i was having this conversation earlier sometimes when people take um take some money out of those growth stocks like that they’re looking for a home that that money is going to go somewhere they’re going to take some of the chips off their table but uh they’re they’re they’re going to the money is going to go somewhere right and

sometimes that’s a good thing for commodities yeah yeah so time will tell you know so i mean when we when i looked at you know like the p e ratios i mean the fear index consumer confidence is down inflation’s up obviously the purchasing metric is down but and you know when we’re just talking about the bearish case one thing that did pop up in my mind was pig iron you know pig iron is down i think close to 13-ish dollars a ton month over month and so i feel like ukraine russia the tension’s over there who knows what’s gonna happen who knows what which direction this is gonna go for over the next 30 60 days but but month over month that was one of the one of the bearish points that i felt like was worth mentioning i’ll uh i’ll move to one another one here that i know you’re gonna have some comments on is uh is hot roll i mean this chart is ugly it is straight down right so last month we were on like the 14 14 50 mark and now we’re at the 1165 as of yesterday

on the futures i mean that that is uh 250 dollars to the negative so that that that to me is pretty shocking that is what are you what are your thoughts that’s what happens when the steel mills get a little greedy on the new steel side that’s that that’s just taking out some of the juice that was already there like i mean for someone to argue with me that that’s that’s that’s gonna affect the scrap market i guess i’m gonna have to say yeah i i might have to uh counter that with when you run historical margins at some point you got to give a little to get a little all right so tell me do you feel like uh what do you mean is it a thou i mean being up being a somewhat of a steel guy too do you feel like once hot roll gets down to a thousand dollars a ton does do we see some massive buying come in or is just let the knife drop no i feel like i i feel like that the here’s my opinion on that i don’t feel like everybody’s sitting on the

sidelines with a bunch of cash waiting for that price to come down and they’re gonna load up the truck i feel like there’s been you know a lot of gravy on those mashed potatoes and mashed potatoes can still be good and they don’t require that much gravy now if the gravy is available and it hasn’t made it all the way around the table and people get greedy out the gate then it’s gonna be that it’s there but in my opinion like those mashed potatoes are still gonna be there the steel i think the steel mills are still running that was like an 82 81 um percent clip which is consistent with the way it’s been but you’re gonna have to give up some gravy so the rest of everybody else can have some on the potatoes is the way i see it right so yeah go ahead that was the most shocking to me to see the operating rates i think they’re up like one percent month over month right yeah so when you see a hot roll just fall through the i mean it’s going straight down you would assume that order books

have gone straight down too and therefore capacity or you know steel production would go down so i was pretty surprised that wasn’t the case and it’d be interesting to run a historical chart of like the the relationship between the two right there’s with with mill utilization and um hot roll pricing or cold world pricing or whatever um i think that would be kind of an interesting dynamic to to look at at some point do they do they correlate all the time is there a one for one or two for one correlation or do they actually inverse at certain times um i don’t know the answer to that i just think it’d be worth taking a look at because there’s so many factors at play you know i mean we hadn’t we’ve never seen a run up as as fast and as hard as we’ve seen in 2021 so it’s kind of hard to say well if it’s coming down that fast well it is coming down fast but it’s also like look how fast it went up and then at some point does it even back out does it nor fall back into the

trend lines of you know i mean without giving away any insider secrets i’m i’d i’m sure i could talk to somebody argus whatever and say what is the historical margin of scrap and and hot roll coil i mean what does that look like generally speaking on average yeah i i think argus does track that in a chart form that’s pretty cool and so i i had to go back and look because i don’t know the answer other than you know just in my you know kind of little pocket of the world over here it feels like yeah some cream got taken off the top but there’s still decent margin in there considering the order books are there and considering there’s more capacity coming online right i mean in the next couple years you’re going to see even more capacity hit the streets which now from a scrap standpoint is it has a real potential to kind of shake the system i think and and maybe mill margins fall fall back in line yeah and that that’s certainly good but i think what’s driving the pricing down is when you look at imports that chart

continues to get higher i saw that you added that chart in that in your website and i and i i hadn’t really seen that chart i really looked very hard at and i was like oh wow i go that’s a that’s a big number and that thing isn’t that thing’s not slowing down which i think is a product of a strong dollar too it’s also a product of weak um export markets so you combine those and you know you’ve got a lot of countries that are still shutting shut down right or at least partial shut down or have us have their economy slowed so what i feel like could be a real you know telltale sign like which is just kind of happening this month which could really flip the script at least for the domestic steel mills is gonna be what does the export markets look like you know going in for the rest of this year i mean if they start to turn on like they’re like they’re trying to right now especially some of these asian countries um and you start seeing that that export market turn on the domestic steel

mills in my in my mind that they’re gonna they’re gonna be fighting for scrap now well yeah i i think i mean that is one of the bullish points so that’s all the bearish points i had on the on the bullish side you know you look at uh you look at this chart i mean from from january you know third to now i i think this this report was published yesterday i think export was up 23 bucks or i think it’s up 25 now you know so month over month that’s that’s a pretty big jump yeah and i think that’s that’s what i’ve what we’ve lacked on the scrap end which has been a boon for the domestic steel in is there’s only been one real person at the auction you know as i always said you need at least two to drive pricing and the two key ones for the scrap industry is a strong export market and a strong domestic market i personally feel that the domestic demand will stay strong the margins are going to have to come down on the new steel side if the export market starts to strengthen

up and if these these countries start opening up a little bit it’s going to be an interesting it’s going to be an interesting dynamic it’s going to be an interesting game um to kind of see how that all unfolds and that’s what’s the most interesting to me if you have the ability to ship to the coastline or ship you know um say to the middle of the country or some of these uh more central steel mills that’s going to be where i think you’re going to be in a better position because you’re going to kind of at some point you might have a two-way go i like it i mean so talking about the worldly market iron ore i think that is uh what is it iron is up around 14 month over month so i feel like that’s uh that’s a great good sign for for now the u.s market by other markets too yeah i think that that’s definitely that helps the cause um turkey and what’s all going on um in that area i mean they’re a big ore producer right and so if that deal gets squeezed um

if it becomes an economic war maybe not a full-on war but it starts economically that could change you know that could change the game not just for ferris but really on some of your pgm side you know which is obviously not part of this conversation but there’s a lot of natural you know resources that come out of turkey that they’ll rest the world depends on or at least they play a big role and that’s going to change that some of the dynamics especially on the ferris side absolutely what do you uh i mean let me show you the uh the oil oil uh that’s our bullish that’s the most bullish case of all right i know right like i mean you just look i mean i i would never guess oil would take this big of a rollercoaster ride but here we are i you i wouldn’t have expected that november to december dip to 65 but i feel like this train is just getting started i i can’t imagine that we’re not even in peak travel season like that’s what’s scary right i mean we wait till springtime comes you know from

spring what is it like from spring break to like september or something is like peak travel season in that range i mean we don’t even have i don’t i would be i’d be curious to know what the number the percentage of trucks that were on the road two years ago or three years ago compared to what is today which is why we’re fighting these logistics issues right the percent of cruise ships that are that are out there that are you know those are big oil consumers the percentage of airplanes and um that’s out there compared to a couple years ago i mean this thing could be a i mean the oil price i feel like is just a tinder box waiting to take off i mean that’s it which is scary if from an inflationary standpoint you know i mean the cost of things could be astronomically higher than they even are today yeah yeah so i mean i feel like i feel like uh talking about the market conditions i mean obviously oil is always a good good indicator what’s going on in the world but i think a lot of people are

scared of the inflation thing you know so it’s just uh to me i feel like for year 2022 i’m optimistic but i’m also um i’m not real like ready to to bet the farm on that you know no i was i told somebody if if you would ask me january at the beginning of january of 21 if we would have saw the kind of year we saw i would have told you i’d have laughed you out of the building i know we’ve had this conversation before right like out of laughing and said yeah right like in your wildest dreams here you are then now at the end of the year i’m like oh man we gotta figure out how to how to how to do some things different you know we’re gonna pay a bunch of taxes um if you and now i mean maybe i’m too optimistic i mean i don’t expect 2022 to have the kind of margin to have the kind of up you’re not going to get that kind of upswing but i also don’t i don’t see this big you know world crushing downfall that you know existed in

in 2008 or nine i just i don’t see it now maybe a little bit down the road but i feel like there’s too much money still kind of sloshing around the system too many projects that are still kind of trying to get done you know the interest rates are still low i mean you can talk about moving them up all you want to but the reality of it is like they still haven’t moved them not even a quarter of a percent right like you can talk about it and you know you talk about all you’re gonna do in life but until you actually do it i mean it’s just a bunch of talk and i feel like that’s kind of how interest rates are yeah so i feel like there’s potential 2022 is uh i feel like i feel like there’s a lot of potential that um could still happen so that’s the that’s the bowl case like let’s go i love it i love it so i feel like we got to talk about the x factor this month huge huge winter storm supposedly rolling through the midwest yes that’s all i’ve been

talking about the last couple days trying to prepare logistically prepare on the purchasing side of it what do you think how does that impact when it’s happening right during the trade so real quick and you have a lot better feel for this i hear the guys down south talk about the river freezing over right and how that affects logistics can you explain to me and our listeners like give them a little information what does that mean when people talk about the river fl freezing up and and screwing up logistics well i think i think generically speaking right very generically in the united states scrap especially the midwest generically flows north to south right so just a very generic statement so if that if that’s the case if the river freezes let’s say what whatever that line is it iowa is it you know somewhere in illinois right so for the for the listeners what is what river are we talking about all right mississippi river right okay yeah and so if if that river flow freezes then also if you if there’s any scrap fl flowing out of chicago minnesota i mean iowa those

regions all sudden it can’t right and so especially i mean the two factors there is always when it’s going to freeze so when’s it going to open winter and close then when is grain season when is when is all that grain coming down the river and that when do rates go you know really high during fall season so that’s always the big evan flows of from what i have seen on the of the river impact okay and so you know it’s just more of a logistic hindrance when you got enormous ralph rates probably versus barge freights coming from the north right north to the south and and can you even get the rail cars right and so those are always two components and so that’s when i those are my thoughts when i think about a river freezing so how does that affect the flow then does it then not enable the scrap to flow north to south so then basically the south the southern mills or the export side does that then open those guys up to basically potential price increases because they can’t procure the scrap from the north and bring it

down is that i mean is that like kind of a layman’s way of saying like that’s what can make that market you know price different than say the midwest yeah yeah i think you’re seeing i think you definitely see the impact where we’re scrapping the midwest or upper midwest gets gets kind of stuck you know and until the spring and then guys and especially the guys in the south southeast particularly you know where there’s a lot of steel making going on if the export market’s good and also they can’t get scrapped from the north i mean those are two two components that are they’re not a good milk are not a good mix if you’re uh if you’re a steel mill trying to buy scrap okay and because i was wondering because i mean and i don’t know enough i mean obviously i’m kind of locked into my region over here and kind of what we have going on so when i hear that i’m like they’re like oh this this river’s about this river freezes it’s on and i’m like what what are we talking about here like i don’t know i mean

in the day i’m just worried about it they’re gonna close lab canyon so i can get my trucks over the hill you know and they’re like man this river freezes this is going to be good i’m like okay explain this to me well it’s just a trickling down effect right yeah you got you know if you start you start messing with scrap flows and it just every everybody starts playing the game and it just goes east to west our east and west and to the midwest so so the midwest from what i’ve heard so i i got some friends in indiana and some guys over there and they said you know midwest market is soft this month um and i’m over here on the west coast saying hey the west coast market is strong i mean the west coast markets it’s an up market i mean anybody will tell you that it’s just a matter of how much and where and what the what this what the deal is now if i start moving scrap east and i’m trying to go that way you know maybe not maybe it’s not as strong it just

depends on what the demand situation looks like but off the west coast i mean it’s an up market and i mean going into the midwest um you know they’re talking it sideways to down and i and i’m curious is that is that just because of um export opportunities versus midwest opportunities that kind of we talked about the beginning yeah i mean i think i think when export markets are not good right you see the west and east coast scrap go inland right yeah when they are good you see that scrap from the midwest sometimes go out right just like you like you’re if the export market’s good you’re going to sell your scrap out west but it’s not going to sell up there locally right and so yeah that and i just think that’s that’s kind of i mean last month we’ve seen a lot of that scrap on the export market wasn’t those export homes weren’t available you see that scrap flow into the midwest or in inland and now we’re now we’re seeing you know if if export does become hot right you’ll see just the opposite interesting always good man i

always enjoy this conversation i hope that our like listeners viewers whatever get something out of it like i said go check out your website um the best graph ever it’s super informative it’s got all the charts that you were flicking through here if you’re listening to this then you know when you get some time go check it out um other than that man i always enjoy the conversation i always enjoy you trying to beat me up and take my price down so it’s like talking to anybody from the mail just over i’d surely appreciate your time most important i appreciate what you’re doing for the industry and getting bringing more light to uh what we do so it’s awesome i try man i try you you’re doing the same like i said this is all your brainchild so i’m just happy to be a part of it and uh we’ll keep it moving and hopefully you know people listen and they get something out of it and the other day we’re going to have fun no matter what so if they don’t like it i guess they go listen to joe rogan or something

that’s right thanks brad take care man