**Welcome to A Scrap Life Podcast**

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:**
What’s going on, everybody? The trade is back. It’s September, and I can’t believe it’s here. Next month will be Halloween, then November, Thanksgiving, Christmas. But for now, it’s September. We’ve still got 20ish days left of summer. So, let’s soak it up, man. I’m here with my buddy Chad Eller Brock to talk about the Ferris scrap market. The trade once again. What’s going on, Chad?

**Chad Eller Brock:**
Man, I’m excited to talk to you today. I feel like this is an easier market to be more of the bear. So, I’m looking forward to today.

**Brett Eart:**
It’s sloppy, man. I’ve been reading articles out there. You know, September is usually a bad stock market trade month. And I just knew you’re going to bring some charts at me and say, “Hey, the market’s off. The world’s coming to an end.” And I’m like, “Ah, here we go. Time to go fight the fight.” So, the flows are not great. The price should be up, but I have a feeling you’re going to tell me that’s not the case.

**Chad Eller Brock:**
Well, Fast Markets is doing the job for me. I read one of their articles today, and it said at least four major producers in the US have already issued mill cancellation notices.

**Brett Eart:**
There you go. They usually don’t cancel orders when things are going higher.

**Chad Eller Brock:**
Yeah. They usually don’t cancel when the market’s up.

**Brett Eart:**
As a steel mill, where you get to cancel when the market’s going down, and you gotta hold everybody’s feet to the fire when it’s going up. I wish I could do that. It’d be kind of nice.

**Chad Eller Brock:**
Yeah, that’s just the steel industry. Steel is the same way.

**Brett Eart:**
Alright, man. What’s going on? Give us the details.

**Chad Eller Brock:**
I would say it’s an odd market because it feels like machine shop turnings, cut grades, main PNS heavy metal feel like they’re in short supply. Shredded kind of feels semi-balanced. Primes relative to last year are still high. We’re at a very similar shred price year-over-year, primes $20-$30 higher than last year. To me, it’s crazy how predictable these markets have become.

**Brett Eart:**
What do you attribute that to? Is it just the information available now?

**Chad Eller Brock:**
I definitely think there are fewer secrets in the business, but also many scrap tons are controlled by corporate America, and so many steel mills are controlled by corporate America. Cash flow and inventories are also major factors. No orders equal no inventory.

**Brett Eart:**
Just you attribute it to consolidation.

**Chad Eller Brock:**
Yeah, consolidation has smoothed out the bumps. Big players dealing with other big players. Big steel mill corporations are buying from big scrap corporations.

**Brett Eart:**
I saw something interesting on LinkedIn. Only 20-22% of the scrap market is by the biggest companies, with 80% still by small and medium-sized companies. What do you think?

**Chad Eller Brock:**
I agree that’s true. Probably true if you add it up, like SA recycling or Cleveland Cliffs. But when you look at mill buying, they have more market influence today than in the past.

**Brett Eart:**
It’s not the actual commodities being generated. Just like anything, something’s worth what someone else is willing to pay.

**Chad Eller Brock:**
I feel like that’s the number one lesson in the scrap business that translates to any industry.

**Brett Eart:**
I’m going to talk about this at the scrap expo. For the scrap business, buy with margin, try to move your tons. If you have room, take a risk if you feel the value isn’t there today. But don’t risk your business waiting for an extra buck in the future.

**Chad Eller Brock:**
Yeah, and we’ve had sideways markets. We’ve been repeating a $20 downside, $50 upside, leaning on inventories. I want to talk about the macro market. What does a cut in interest rates mean this month?

**Brett Eart:**
I believe the Fed is behind the curve. We’re in what feels like deflationary markets. Copper and base metals are starting to trade higher. There’s optimism that rates might come down.

**Chad Eller Brock:**
A cut in interest rates should make borrowing cheaper. We might see boosting in construction, manufacturing, increasing steel demand.

**Brett Eart:**
There’s a 90% predictability of a quarter-rate interest cut in September. The 10-year Treasury is at over 5%, indicating a stronger economy that could help with steel demand.

**Chad Eller Brock:**
Long term, a weaker dollar could be good for steel. Short term, it’s hard to know what will happen.

**Brett Eart:**
I’m a fan of the all-in podcast, and they say quants, AI, and traders are usually ahead of rate cuts. The Fed might lower rates, but it’s already built into the system.

**Chad Eller Brock:**
The 10-year Treasury being higher indicates potential inflation. As a business owner, things probably won’t get cheaper than they are today.

**Brett Eart:**
Absolutely. Invest when it’s cheapest, not when it’s most expensive and everyone else is doing it.

**Chad Eller Brock:**
Crude steel production doesn’t feel like a 78% US steel capacity utilization rate. What’s driving it is the lack of export.

**Brett Eart:**
Our steel mills might be running at a decent clip, but the lack of export means there’s less pressure on prices. Mills are running in anticipation of outages.

**Chad Eller Brock:**
Outage after outage in mills scheduled for maintenance and upgrades. You can’t take this much capacity out and not affect pricing.

**Brett Eart:**
Do you think they’re taking capacity out in anticipation of better times or because of less demand?

**Chad Eller Brock:**
I think it’s more about doing upgrades or maintenance than cutting labor. Tariff uncertainty, reduced imports, anticipation of demand.

**Brett Eart:**
Reduced imports and potential tariff support are setting up a slightly optimistic outlook.

**Chad Eller Brock:**
Steel mills won’t build their margin back immediately, but over time, they will bring scrap prices up with them.

**Brett Eart:**
There’s always been the complaint that steel price increases don’t immediately translate to scrap price increases. It’s about building margin first.

**Chad Eller Brock:**
There’s a correlation between steel mills making money and the scrap guy making money. When steel mills are profitable, they can pay more for scrap.

**Brett Eart:**
The scrap market is elastic. The more you pay, the more that’s in the marketplace.

**Chad Eller Brock:**
More volume equals more money. Not about selling for comparable prices to the steel mill’s margin.

**Brett Eart:**
It’s about paying more, driving more scrap volume. If you position yourself to process it, you make more money.

**Chad Eller Brock:**
In supply chain, balancing price, quality, payment terms, and logistics. Feels like we’re on a crookedy bridge.

**Brett Eart:**
If demand or tariffs change, it could go either way. But currently, it’s a boring, flat market.

**Chad Eller Brock:**
Feels like we walk on a thin bridge where demand breaks could lead to shifts. Hoping for a positive market turn.

**Brett Eart:**
Scrap business is about placing bets wisely. It’s about operating in a volatile market.

**Chad Eller Brock:**
For smaller yards or newer yards, focus on cash flow and finding growth opportunities. Pick a commodity, put a little away if you can afford to.

**Brett Eart:**
Look for growth opportunities in current markets. Painful but the best times to grow. You’ll look back and be thankful for these decisions.

**Chad Eller Brock:**
Your words align with your actions. Your advice is based on real industry experience.

**Brett Eart:**
This is not investment advice. Do your own research.

**Chad Eller Brock:**
Hope you got something out of this. Have a great day and go make it happen.