# Welcome to A Scrap Life

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.

**Brett Eart**: All right, we got a very special copper trade today. Although in person online, drove all the way to Idaho to hang out with us, knucklehead.

**Guest**: You drove to Idaho from California.

**Brett Eart**: 981 miles. I saw it today.

**Guest**: Well, thanks for making the trip. Thanks for checking out our facility today. Excited to have you in person and excited to talk about copper and a lot of volatility from our last call.

**Brett Eart**: We went from $5.80 to $4.50, $4.40. Things changed in two weeks. Now we’re back to using the coax. Now we’re back to, so good, guys, nothing happened.

**Guest**: Nothing changed.

**Brett Eart**: Yeah. Well, tell us what’s going on with copper this last month.

**Guest**: Well, since we spoke, we had the big U-turn, I call it the big correction. Of course, the market was anticipating a lot of the supposed tariff to be hitting the prime material, which is cattle. And I think that everybody penciled that price in there. The week prior to that, we saw the market rise 50% from the price that started at the beginning of the year. So the market had totally penciled that in there. And, of course, we get the news that it is exempt, and the tariff is really on the semi-finished product, which is still going to have some effect on demand, but we are still trying to figure out what that is like.

**Brett Eart**: What’s got exempt from those tariffs?

**Guest**: The big exception is cattle, right? And that’s really what drove the rise of the market. The cathode is the most heavily imported material, and I think that’s what kind of drove that price back down. Your biggest import being the cathode, being taken off the table, allowed everybody to breathe again.

**Brett Eart**: In the US, we only produce roughly 35% of the cattle we need, so we are importing about two-thirds of that number. That’s why that was a big driver. We don’t produce enough today to be able to essentially make it in-house.

**Guest**: There was kind of some rumblings about actual scrap being tariffed or not being tariffed on the outbound side, right? And maybe, there was a component of that they did leave in place on a percentage basis, right?

**Brett Eart**: Yeah. There’s some wording in there, and you know anytime the US government is going to tell a private business where to sell and how much to sell, it’s going to raise a lot of hairs, rightfully so. The way the text is written is essentially a recommendation, not a rule. There’s no implementation time frame, there is no mandate to pull any kind of trigger right now.

**Guest**: Logistically, something like that would be immensely complicated to manage, and quite frankly, our government has other priorities. Copper scrap exports are probably not on their priorities at this time. Even though as a country, we export a large percentage of the world’s copper, right?

**Brett Eart**: Out of the United States, yeah. And I don’t know what percentage is domestically consumed versus domestically exported, but I feel we lean pretty heavy on the export side.

**Guest**: Yeah. Depending on who you ask, but roughly 25 to 30% of the domestic scrap we produce in the US stays in the US, mostly higher grade materials like very bright number one categories, and to a much lesser extent other materials. So, 75% of this scrap that we produce heads to the export market.

**Brett Eart**: Is that because of our EPA and environmental laws? Over the years, we’ve kind of killed that industry here just because of red tape?

**Guest**: It is death by a thousand cuts, right? Not just one item. It’s lack of labor, lack of investment, consumers, demand, everything. Now we’re trying to put that industry back in business, but that doesn’t happen overnight. You don’t just turn a light switch on, so you got five copper refineries fired up. It takes years of investment.

**Brett Eart**: Yeah. Business owners need a reasonable horizon of certainty to project and say, “Let’s move this scrapyard across the street.” Logistically, it can take years for the process to develop in the copper side. I’m not advocating for a dictatorship, but consistency in leadership for a decade or more can provide stability for long-term business decisions. In the US, sometimes we totally flip-flop every four years.

**Guest**: Every four years. Maybe you get lucky and get eight, but even then, it takes years to build steel, aluminum, and copper refinery mills. It’s a plan that takes years of planning and construction, feeling good about getting repayment on investment.

**Brett Eart**: It’s interesting to see how many people will bet this will sustain or stay this way. I guess it depends on how the next year or so goes.

**Guest**: They’re putting in millions, billions of dollars, and if it changes in four years, they could just kill the drill, which would really hurt a big company about that investment.

**Brett Eart**: In the investment that we’re looking at today, new capacity for copper processing is coming into the US. Unfortunately, for people on the west coast, anything west of Chicago is geographically located to the southeast region of the country. There are a couple of reasons for that, like labor access, ports, manufacturing, and EPA rules.

**Guest**: For 80% of the country, we have no means to get to a copper mill with any reasonable facility. So even though we’re seeing an increase in capacity, that capacity is very concentrated in one geographical spot.

**Brett Eart**: Yeah.

**Guest**: It doesn’t benefit anyone west of Chicago. A personal example for us is that we were tired of getting claims from China. I’d send a container of insulated wire, and they’d claim it’s less, leading to claims. We decided to put the wire chopping line in 2012, so we could sell into the domestic market and have more certainty.

**Brett Eart**: With certainty, you know exactly what you’re selling. Long story short, I think there will always be an export component unless we have the ability to refine everything domestically. But I don’t see that happening.

**Guest**: Regionally, big consuming countries are still China. China consumes the majority of global production for metals. But they’re going through issues like high debt, low demand, overproduction, and an aging society.

**Brett Eart**: India is a big player too, trying to backfill for industrial manufacturing but struggling with infrastructure. Roads and bridges, and basic transportation are challenges for them.

**Guest**: China invests in roads and cities, investing in infrastructure, which pays off when trying to grow.

**Brett Eart**: That’s how you move commodities around. Culturally, some people are more patient, building roads to nowhere and eventually getting the population to grow there.

**Guest**: Investing in the future naturally curves demand for metal. Debt and demand present slow cycles for them, but turning those cycles takes decades, not months.

**Brett Eart**: Globally, we’re seeing liquidity impact commodities, with values increasing. China is putting money into the system to prime the economy.

**Guest**: The question is what happens in the next 90 days regarding tariffs with the US. We buy everything made in China or with parts made in China. If tariffs increase, it could squeeze their economy.

**Brett Eart**: For those not following the news, there was just another 90-day extension issued. We’re back in the process of figuring out where everything is heading. Depending on your size, if you’re small, you want to know for short-term planning; if you’re larger, strategic decisions are important.

**Guest**: It’s a good time to be a small or medium-sized operator because you can make quick turns. Big companies have slower turn capabilities.

**Brett Eart**: Your advantage as a small or medium-sized scrapyard is your ability to move quickly. While big guys flood the market, your speed and service could be your edge today.

**Guest**: During high commodity pricing, big companies play a bigger role, but when prices are low, smaller companies have great opportunities for quick market play.

**Brett Eart**: You can grow during times when the market lags; when good, big facilities crush it. But when the market is down, big facilities struggle massively.

**Guest**: As you grow, you need to consider the implications, particularly if you have multiple facilities. Know what you’re getting into and anticipate those downside risks.

**Brett Eart**: Adding a new yard comes with considering the flip side of potential downturns and understanding the risks. The tide lifts all boats, but when it goes out, you see who wasn’t ready.

**Guest**: Absolutely, growth has its multipliers both ways. In good markets, everything thrives. In downturns, the compounding effect can be crushing.

**Brett Eart**: Speaking about charts, the key focus is on volatility, driven heavily by financial institutions. Tariff conversations affect commodities, driving pricing fluctuations.

**Guest**: COMX has unique characteristics compared to LME, mainly the influence of financial institutions focusing on volatility. The difference is seen in day-to-day trading patterns.

**Brett Eart**: At the start of the year, LME was marginally higher and maintained consistency in closing prices, though it doesn’t capture intraday volatility.

**Guest**: For physical traders, staying on LME aligns better without needing to navigate fluctuating COMX variances. While COMX’s indexing continues, LME tends to offer less volatility.

**Brett Eart**: Full disclosure, LME ownership ties back to Chinese entities, affecting strategies around tariff conversations and pricing advantages. It raises questions about influences in market control.

**Guest**: Even so, knowing the ownership structure is critical in understanding price influences. You’re right in observing how large consumers use control for pricing strategies.

**Brett Eart**: Let’s switch gears and discuss the upcoming scrap expo, focusing on driving profits and business growth during challenging times. What’s your insight on supporting small to mid-sized companies?

**Guest**: Our agency helps smaller companies compete with larger ones by handling logistics, account management, and sales. Our aim is to broaden resource access in a way small companies can afford.

**Brett Eart**: Your services free business owners to focus on expanding their core business, like gaining customers, by handling the complex logistics and market navigation for them.

**Guest**: Exactly. Reinforcing business operations to support expansion without obliging them to stretch thin on costs, making access to markets feasible.

**Brett Eart**: Hosting panels on these topics and sharing insights allows small and medium scrapyards to gain valuable information and make informed business decisions.

**Guest**: By demystifying the market and offering guidance, we empower smaller operators to leverage opportunities they traditionally couldn’t access. We help translate logistics into actionable steps.

**Brett Eart**: With access to platforms and having mentorship, smaller scrapyards can grow effectively, avoiding past mistakes from larger-yard wisdom, accessing information that was once exclusive.

**Guest**: Freeing businesses from being bogged down by non-core activities allows them to thrive. Offering a shared service approach ensures they maximize resources without hefty commitments.

**Brett Eart**: Thanks for providing those insights and looking forward to more discussions at the expo. It’s been great having you in person.

**Guest**: Thank you for having me. It’s been a pleasure to chat in person—really looking forward to our future conversations.