#127 Matt and Dillon Talk Commodities Pricing
Hello, and welcome to another episode of the construction corner podcast. I'm Dylan, I'm your host and joined now as always by my blue collar. Bad-ass Matt. What's going on? My friend, lots of stuff, buddy. I'm a, I'm fired up over the topics we're going to get to today on things are going well here, but this is a, it's going to be a fun show.
[00:00:24] It's it's funny how it works. I was. talking to Luke, one of our past guests last night and this morning on finances, he put out a story on finances and it's like, Hey, how about that? This is what we're going to talk about today on the show is it's just finances. There's, there's a lot of things and I won't get into his thing, but that he put out.
[00:00:49] Um, but you can go check it out, um, on his stories on Instagram and Facebook on just. Charging full price, not letting your customers use you as a bank, which is all the stuff that we're going to get into today. Um, but I just, I always find it interesting and I try to really see those and point them out when things like that happen.
[00:01:10] When the things that you're thinking about actually like manifest into reality. It's pretty cool when that happens. And I didn't see Luke's posts yesterday, but he's. I've talked with him before about it. He's got a lot of good points, especially from the subcontractor side. That's a, that's a whole different world than I'm used to personally.
[00:01:29] I mean, we deal with subs all the time, obviously, but on a, on a different relationship. And I gotta tell you those guys in a normal construction project, they faced a huge burden as far as cashflow and, and they kind of become a bank just the way that our current system is set up. And it's really sad to see that, you know, people can't pay their bills on time.
[00:01:54] At the end of the day is what it comes down to, or they're hesitant or they're purposely not paying. And that's a whole other problem.
[00:02:07] Yeah, that's you know, we, as a, as a company, we, we make it a point to pay our subs. As soon as humanly possible. We negotiate very hard with our clients for a 15 day net terms, which is not the standard, at least around here, it's usually 30 or 45 even. Um, But even so, you know, we still have to rely on our clients, paying us on time and, you know, knock on wood.
[00:02:35] Most of our clients are great about it. Um, we very rarely have any issues, but once in a while we will, you know, things will get caught up and tied up in some, you know, low level, bureaucratic nonsense that, you know, they can't just write a check and leave it out the door that day. Um, but again, those are few and far between, and we make a definite effort to pay subs because you know, those guys are out basically 90 days.
[00:03:01] You know, the typical subcontractor in, in trade work is out 90 days. So, so they buy their material and then they, they have, you know, 30 days to, until they have it all onsite, they've got 30 days roughly of, of work put in place. And then they invoice me. And then they have another 30 days around then before they actually get paid.
[00:03:24] So, you know, the need for, for capital and for credit lines and all that stuff is hugely important for our trades.
[00:03:36] Yeah. And we did, I did an episode with, um, I'd have to go back and look on financing and that's exactly what they did was to help subs, at least pay for materials and material costs. So they didn't have to carry that. And then it's like a couple of percent is how they're making it. But at the, you know, it allowed subs to then be able to scale because this is where a lot of them, you know, run into trouble is just financing the, you know, cost of materials.
[00:04:06] Yeah. You have to have it upfront. And it's an unfortunate reality, but if you don't have it already, either in, in capital or you can't get it financed through either a, you know, a mobilization loans or credit lines, you can't play. And it's, it's a shitty, shitty reality that we have to deal with. You know, it shouldn't be that way, but that's, that's what it is because no one it's different in the residential world, residential construction, it's not abnormal at all.
[00:04:36] And in fact, it's probably the norm to ask for a deposit upfront, to get some amount of money from a client before you build them a house in the commercial world, I'd get laughed out of every office. I walked in if I said, Hey, and by the way, We need X number of dollars upfront to buy materials or to get our guys started.
[00:04:55] They'd say, no, get the hell out of here. We'll talk to someone else. And you know, on the GC side, that, that helps to foster a lot of, um, animosity, you know, between general contractors and subs, because I'm not a bank either. Right. And we don't have the credit lines, frankly, that our subs do because of this relationship.
[00:05:17] So we can't necessarily just front our guys as much as we would want to. But then on the flip side, they kind of have the argument, well, why should we have to do it? And you know, you can get in this never ending, ending spiral of, of argument and finger pointing. But until. Things much more globally change.
[00:05:36] That's just kind of the way it is. And I hate, I hate using that as a, an end all answer. That's just the way it is and always has been. But, um, in this case, it, it kinda just is, yeah. And one of the things that, I mean, for you guys that are in Schaefer that are doing really well is 15 day net terms. And like, you don't see that.
[00:05:55] And that as little as that sounds, it makes a huge difference. For everybody down the line and shaven 15 days off of it, or, um, 30, if you're going 45 and in government is 90 days. Right? So that's the other problem with government projects is it's 90 day net terms. So things are going to be more expensive.
[00:06:17] So now you're carrying basically for six months, 120 days on a, on a project or more, 150. Cause you're on net 90. So you're going to just charge more to do those projects because of the financing terms on the backend. And then people wonder why, you know, government projects are so expensive as well.
[00:06:36] They don't pay. Um, but that, that's a big part of it. And I mean, there's a lot of things in scheduling in scope and all that stuff that never gets settled, but pay is one of the big ones. And I don't blame anybody who charges more on projects like that. I don't want to pay and take out of my pocket to pay financing costs, to sit around and wait for someone to pay me.
[00:07:00] You know, I can't blame anyone who would raise their prices in that circumstance. And this is, this is one of the things that Luke brought up was don't ever give discounts in construction, especially because, or. The other thing that I've gotten burned on is that we're going to have, we're going to have more work later, right?
[00:07:22] You're going to be on more projects down the line. I can't cash that check. Right. As a check, I cannot cash. So as much as we'd love to believe people it's, Hey, this is what it is. This is what we signed, you know, like, why should I cut you a deal for whatever? Like you want to put that in writing and sign it.
[00:07:44] Sure. Now we can have a deal, but until then, Your word means nothing, frankly to me. And that happens far too often in construction. Hey, you cut us a deal on this one. We'll be good on the next one. Well, when the next one comes around, Hey, you gave us such a great deal. Can you do that again? And it's like, at some point you're losing money and you probably lost money on that last part project because there's most, yeah.
[00:08:09] The biggest thing in construction is margins are tight, right? It's a three, five. Most 10% margin on anything. And you had labor and overhead and rework or whatever. I mean, your margins are small and you can look at any publicly traded construction company. Their margins are like 1% it's and the best analogy I've ever heard is it's like picking up pennies on the freeway, right?
[00:08:37] So it's like walking across the four Oh five picking up pennies, same raise, same reward. And. So again, don't give anything away for free in anything you do. And don't take people's word on. There's a next one, unless they're willing to sign something, you know, stating that. Yeah. Um, I mean, there's, let's be real there.
[00:09:00] There's there's always going to be a certain amount of, of horse trading. That's going to happen on a construction job because stuff happens, you know, stuff. Doesn't always go according to plan things, come up, but. You know, kinda to echo what you're saying. I've seen the extreme of this, where things get promised and you know, you're really just robbing Peter to pay Paul, right.
[00:09:21] And eventually that note's going to come due and when you can't pay it, it's a really bad day for everybody involved. I've seen, I've seen very extreme cases of this that we won't talk about here, but even just on a relationship level, you know, if you keep kicking that can down the road, And beaten on guys and beaten on guys over and over pretty soon, those guys aren't going to be there.
[00:09:46] They're going to say, you know, screw you, I'm, I'll go work for somebody else. And, you know, that's, that's, that's an unfortunate day when that happens. So you're better off just to everybody be up front everybody's, you know, nobody's going to retire off of one construction project. That's that's the reality.
[00:10:04] And a lot of people try to, but you just have to recognize that. Everett is here to make a decent, honest living. We have to make profit. Otherwise there's no way to continue doing what we're doing, but everybody does from the GC to the, every single subcontractor, to every supplier, to every vendor and the same with the owner.
[00:10:26] If everyone could just kind of come to that table and, you know, shake hands and agree on it, it might make things really easy, but I don't see that happening very soon. And this was one of the things that. Like irked me on the design side. Right? Like you get pricing back and we're supposed to review pricing the design team.
[00:10:49] It's like, well, I have, how do I know what anything costs? Right. Like, but that's what we're supposed to do. And it's like, I don't, you know, I sure maybe like, Sounds good. I, you know, it's, it's a, really the odd thing to ask the design team to do pricing or to review pricing. And I mean, we had to for change orders and stuff, and it's like, well, like, okay, this seems reasonable, but I don't have, like, I'm not an estimator.
[00:11:19] Right. I don't do this every day. And then for us to do that as the check. Yeah, sure. You know, or try to find something that's like, Out of it or catch somebody it's like, I mean, they've got to like, you need to make money. This is a waste of my time. And like, I just, I never felt good about it, you know, and being put in that situation to, you know, review pricing and change orders, just like, okay.
[00:11:46] Yeah, they that's what they said they did. And like, I didn't watch it. You know, this is your, why is this my responsibility to review, you know, this stuff? You're preaching to the choir, man. That's why I thumped my design build drum so loudly because of that exact thing you just said, design consultants are supposed to design they engineer and they design the construction companies are supposed to price and install.
[00:12:16] It's a symbiotic relationship and there's, there's give and take and there should be collaboration, but it should never be the old school. Okay. Well, the design is going to charge. A lot. And because of that, now they're going to feel obligated to put pricing to a project or to a certain aspect of it. It doesn't make sense.
[00:12:36] You know, that the design guys aren't in the trenches every day, dealing with commodity pricing, dealing with labor fluctuations and market changes. You just aren't, you're not supposed to be, we all have our lane. And if. If we would all get in the same damn car and we'd all get there a lot faster than this zigzag competition that we have.
[00:12:56] And you know, that the design build option, I think solves that if you do it right. Yeah. Well, and that's so two things on that one. Yeah. We need to all come to the table and say, Hey. I'm a designer, I'm an engineer. This is, this is what we do. And I'll tell you if it'll work or not. That is my job. Will this work?
[00:13:21] Yes or no. Does this meet code? Yes or no? That is my job at the end of the day, what it costs, I don't know. Right. Like now if I worked for an electrical contractor and did that stuff in a signed build capacity and had access to all the pricing and all that data and. Sure now. Okay. But at the end of the day, I'm not responsible for price.
[00:13:45] And then if you did it right, and this is so much to your point, because most when I hear design build it's, it's some zombie monster of like design build. It's not fully integrated. It's not people like truly collaborating and dealing with price and, you know, can this work, will this work. What does it cost and doing that back and forth on a very regular basis.
[00:14:13] It's typically, you know, you go hire a traditional design team, they throw it back over the fence and then you get some pricing and they say, no, and you okay. Like, no, what? Right. That's typically how that conversation goes. But for, for like what you guys are doing and actually integrating it makes. Whole lot of sense.
[00:14:33] Um, I've been on board with design build for a long time. It just makes way more sense to do that. If you do it correctly and structure it, you know, to where Amy is. In-house yeah. Cause most of it's bullshit. Let's be honest. It's a, it's a term that's been around for a long time. And folks started using it as a marketing technique.
[00:14:55] No, we, we stopped using it. We, we use true design build now on all of our marketing information and our, our media, because it, it is it's true design build. We will, we'll pick our team from architects and engineers to our MEP team. Sometimes our carpenters and we'll have what we call a D and D meeting a design engineering meeting where all of us will, at least we used to sit in the same room.
[00:15:20] Now it's zoom sometimes or whatever, but yeah. You get all of those different minds together. And like you said, we wouldn't ask you to, to frame walls. Just like knowing what asked me to design a riser diagram. It's not what I knew. I don't know how to do that, but we get all of us in the same room and, and form this really it's, it's like forming a mastermind.
[00:15:43] Right. And you all work towards that same goal. You, you come up with a budget first and you figure out how to fit everything inside it, under that umbrella. And it's, it's a beautiful thing when it works totally. And kind of, it gets us to probably the big meat and potatoes of today's podcast is. Pricing, right?
[00:16:07] Like just in commodities prices, fluctuation of markets, what labor's doing, what, what pricing is doing, how, how long can we hold things? Um, really everything that's going on in the market. Right? There's the, the funny teams of flexing, you know, in 2020, one of the means that I saw was guys, you know, got this whole pile of toilet paper.
[00:16:29] Right. That's the 20, 20 flex and 2021. It's a pickup truck of plywood and some dojo coin right here, the, through the flexes here in 21 so far. Um, but let's dig into commodities and pricing and, you know apply what in particular, right? Like half, half better plywood. And really let's talk about some of the markets how pricing gets set and maybe some of the things that everyone's seeing the price increases, but they don't know why.
[00:17:04] And I really want to dig into the why and how, why this is happening, especially in commodities pieces, like steel, wood, um, all that. So with that, I'll let you dig into this crazy world that we live in right now. So this is a topic that I deal with quite literally every single day. And it's, it's consuming most of my days now for the most part, because, um, to say things are running out of control would be an understatement.
[00:17:36] Um, so 2020 happened and I won't get into my own political beliefs about what happened, but we all shut down for a period of time, right. Wrong or indifferent. There's a huge contingent of industry out there that while yes, they shut down for a month or two months, whatever the hell it was. It seems as though they they're using that as a, as a habitual crutch now to continue to under supply a market that has demand that is frankly, through the roof, right?
[00:18:11] Everything happened exactly opposite of what the industry, as a whole thought was going to have in the construction industry. Everybody. I think at least myself included in everyone I've spoken, spoken with thought things were just going to kind of die. In 2020, things were going to stall construction.
[00:18:28] Wasn't going to happen building wasn't going to happen. Well, the exact opposite happened. We all sat at home and all of a sudden people are building decks and garages and finishing basements and putting additions on their house and putting in pools and. But, I mean, that's on the residential side. On the, on the commercial side, everything kept going.
[00:18:46] All the planning kept going while we may not have been physically building for a little bit there. All of that planning, all the pre-con, all of the design was, was still churning along at a furious pace. So now fast forward and everything is everything's still not opened up. Let's be real, but everything is closer.
[00:19:05] Now the market has not recovered. So you look at. Let's take lumber on the, on the residential and commercial lumber, um, lumber pricing in the last 12 months has tripled tripled. I'm gonna say it one more time. Tripled that is almost crippling to a construction project. When one facet of it increases in costs that much.
[00:19:33] Now there's all kinds of reasons. There's all kinds of speculations. You know, the, the mills. Shut down. They reduced production to demand. Like I mentioned though, never reduced it increased. So why didn't the mills pick up capacity or ramp up production as soon as they could, because they're still not running at full speed.
[00:19:53] They're still not engaging in, in looking into new efficiencies and technologies to, to bump that production back up. Well, was it a fear of more shutdowns maybe, or. And this is just my opinion. I'm only half of this podcast, but was it an ability to capitalize on a really shitty situation? You know, there's something to be said for the underdog who finally gets his day in the sunshine and wants nothing more than to stay there.
[00:20:24] And when you look at the differences between lumber and steel, steel has always been a more expensive product, right? Just is. We were talking earlier, Dylan and I just recently priced out a building for a prospect. It was a small little building and it was designed to be framed out of, out of wood. So just for shits and giggles, we priced it out of light gauge steel.
[00:20:52] Also my numbers that I got back were literally within pennies of each other, between wooden steel, that I've been doing this for. 30 plus years now. I've never seen such a thing. I've never seen it even come close. Um, there there's something going on out there that is allowing this to happen and it's not just lumber.
[00:21:16] It's, it's everything. steel is another huge one, you know, and as a commercial guy, we deal more with steel than we do with, with wood. Um, Pricing is going up. Pricing always fluctuates rapidly with steel. And a lot of people don't recognize that, but steel pricing, the commodity markets and steel fluctuate constantly.
[00:21:38] So it's not unheard of to go through six months of pricing increases. What's unheard of. However, is to go through. Like two years of pricing increases and to have the big guys up at the top, up at the, the actual suppliers of suppliers saying they're forecasting another three to five years of this shit.
[00:21:59] So no one can afford to build anything at some point. And those that can't afford now, there's no supply. We're getting quotes for structural steel that we won't take delivery for 40 weeks, 40 weeks is damn near a year in my book. To plan a construction project with a, a 10 month lead time on a single item.
[00:22:22] And that just happens to be the single most important item of the project. How do you do it?
[00:22:32] It's a, it's a huge, huge issue. Um, I mean, I've got stats, I've got all sorts of shit we can talk about, but it, it really boils down to. The these issues at hand why is it happening? And who's really, who's really winning here. Cause it's not, it's not my suppliers, my vendors, my subcontractors. It's not me.
[00:22:55] It sure as hell isn't my clients. You know, you can kind of follow that food chain and figure out who's actually making money during this time. And, and who's getting hurt by it.
[00:23:09] Which brings up one of the, I mean, there's so much in there. but one of the things that I want to really point out is one, most of this is all public information, right? For like, And of course steel is publicly traded. They have earnings calls and you can read through the transcripts or listen to them.
[00:23:27] So any public company, every quarter for earnings, they, you know, their CEO, their CFO, all their people get on the phone and analysts and investors like ask questions. Right. That's what happens for anybody that doesn't know that it's all publicly available. Um, the other thing is their financial statements, right?
[00:23:46] They have to disclose their like , um, their quarterly financials. So they disclose all that. And then they have an annual report that goes out every year. Um, and the CEOs of those companies, right. you know, forward to it, they're analysts and all those guys write a ton of stuff about market outlook and all that stuff.
[00:24:08] Again, very public information, very available it's it's out there for anybody to go and read. So with that, um, a lot of these things in the
[00:24:24] So I'll jump in and, um, new car in particular and not to point too many fingers at them, but first quarter 2021 had their highest profits recognized to date. Let that sink in for a second. Coming off of a year, that was pretty rough for a whole lot of people. First quarter 21, highest profits ever. Us steel right now is 68% higher than the global market.
[00:24:56] What it's doing to us as an industry is, is cutting us off at the knees. And everyone has always wanted to buy American buy American steel. Keep it in house, keep it domestic. Well, here's some food for thought. Even with all the tariffs, all the other shit on foreign steel, it's rapidly becoming cheaper now to import foreign steel than it is to buy it domestically.
[00:25:22] There's something wrong with that equation, right? It's
[00:25:30] Hey, this is a real podcast. Got a high ground ups guy came. Um, that's what it is. so 100% and. The thing that we have to understand. So commodities are traded on a global level. And so commodities pricing for wood, for steel, for pork, for beef chicken, like you name it in the commodity of Margaret's, I'll trade it on the Chicago mercantile exchange.
[00:25:56] Comax so all that stuff is traded. at and that's at a global price, right. That's where it gets set. So this is why when you travel around the world, food is relatively the same, unless you get it, like at a, at a thing, like building costs are relatively the same. There's some things that are a little more expensive, like labor's cheaper, right?
[00:26:20] So you get things in different countries, labor, labor rates, fluctuate, and that's really the big thing that you're seeing. But for as far as commodities, You end up being equal across the board, across the world, because that's what we're dealing in. But when we go to talk about like steel and wood and all these things being so far inflated, we don't necessarily, so supply is we don't necessarily have a supply issue.
[00:26:44] You can, we can talk about, you know, our mills ramping up or not. Are they putting in the required things to do it? Is there fear around it? That's a big, broad question and. Supply, but you, you can realistically, for the most part, like you can still get wood. You're just going to pay through the nose for it now.
[00:27:05] shaped steel and structural steel, like you were saying, now you have a supply issue, right. 40 week lead time. That is a supply problem before. And, but you also have to look at the demand side of these things and see like how, you know, Who is buying and obviously in wood and stuff, we've had a big increase in demand with every single residential person doing a deck project, a home project, because they got nothing else.
[00:27:30] Like where are you going to go? So let's build this stuff at home. So you have a big increase on the. On the demand side. And like you were saying, when you, when you look down the chain, so every if price said at the mercantile right. At the market level, so those guys are trading, you know, by the minute, by the second on what prices, futures, markets, all that type of stuff, because that's what it is.
[00:27:54] It's a futures market. So everybody's trading there and then that price just. Filters down. Right? So a lumberyard produces a train car of wood for 30 grand, let's say which is close to what it actually costs. So they produce that for 30. They used to sell it for 39. Now it sells for 150 grand for a rail car, or more, depending on the hour that you're, you're looking to buy a rail car and take delivery.
[00:28:23] But in this, so you have, you have a fixed. Yeah, let's call it fixed costs to produce. And then, but you can sell it for five times, four times what it went for a year ago. You're going to keep doing that. So, but again, you have as the supplier use, which is a funny thing that you have no control over sale price, right.
[00:28:46] It's dictated at the commodities level. So. Which is a big thing that no one thinks about. So you have, it's dictated just like oil or anything else, right? Your, your shell station is in dictating the price of gas. I mean, within a couple of pennies, but they're not, you know, why would they drop the price or raise the price right there.
[00:29:08] They're playing in the market. So. And this is a thing that I think it's lost for the most part is that price is set at the commodity level. So it's all those people that are trading that are in the futures markets and taking delivery on a given thing. So price is set there and then everything filters down, you know, with suppliers and markups and taxes and all that other stuff that goes into a given product.
[00:29:33] So for. For everything that I think that's one key piece to look at and then also to go back and look at the data and I totally agree on, on tariffs and all that stuff. Seal's been a big thing for a long time on, you know, whether it's Brazilian steel or, I mean, America built the steel industry first, even though the technology was actually invented in, in Europe.
[00:29:55] but we, you know, Carnegie just killed everybody in, in doing that. So like steel has its own unique history. Yeah. And it's, like I said, it's always fluctuating. Um, but what we're seeing now is just crazy. And so, you know, we, we have a supply issue, but the supply issue I think, is, is brought on by two things.
[00:30:20] It's, it's one by the COVID stuff of last year. Um, I'm going to refrain from calling it bullshit on our show. Oops. Um, but yeah. You also have some enormous steel consumption going on right now, there are some, and it's easy to point the finger at one company, um, that everybody shops at. Cause they're building a lot, right?
[00:30:43] That company is the last I heard they were online for 31 buildings across the United States this year for 21. The average size of those buildings is about 4 million square feet. Let that settle in for a second and think of how much steel that takes out of, out of the marketplace for guys like me for midsize guys, even for some of the bigger guys, you know, a lot of the bigger guys around here, um, the Michigan area, they won't touch those buildings.
[00:31:12] Those buildings are built by a few select companies and. Good for them. They that's what they specialize in. They're cut out for it. They have the capital and the backing to do it. but it, what it does is it, it sucks all the available steel out of the way for the, what I like to call the normal projects.
[00:31:28] And that's why we're seeing 40 plus week lead times. But. So this, this one company who everybody knows is building a ton of square footage and sucking up all the steel. What they're also doing though, is they're spring competition because all of the other retailers, the targets and the Kroger's and everybody, the realizing that people don't like leaving their houses anymore, we all kind of got used to having everything delivered to our doorstep, whether or not now, I mean, it's groceries.
[00:31:58] I haven't gone grocery shopping in a year and a half. I can't say I miss it, but. Everything is delivered to my doorstep. So all of these companies are now chasing this other company around the country and building their own facilities, their own warehousing and distribution, their own logistics because they have to, to compete or else they will just simply go by the wayside.
[00:32:17] So we've got this, this never ending spiral right now of. Of sucking up the limited amount of steel that's available. And I'm not suggesting that competition is bad. I'm the first guy to jump on the capitalistic train, believe me. But I think there's, there's other issues at play here that we got to figure out something.
[00:32:37] I'm not sure what the answer is. If I knew the answer I'd I wouldn't be probably podcasting. I'd be sitting in a, in a high rise office, you know, counting my millions, but there's. There's something that has to be done here and we need at least need to start talking about it out in the open, because it's, it's a festering wound right now.
[00:32:53] And it's talked about behind closed doors. It's talked about in war rooms and it's talked about on phone calls and emails with suppliers, but. You don't hear a lot of people just ripping that bandaid off and getting pissed off about it. And that's, I think what it's going to take is us to get pissed off about it, to start talking, to start solving this problem, or we're all going to be really pissed off when the whole market collapses again, and nobody's building anything.
[00:33:20] Yes. So if you look at the new cores annual report, they did seven point let's just call it 2 million tons to outside customers in the first quarter of 21. And then you look at a, let's just call it 120 million square feet of building. Let's call it, you know, half a ton. I don't, you know, I don't know what that math works out to be for square foot, but just call it.
[00:33:47] You know a quarter of that. So then you got 40 minutes, you know, there that's a, that's a full year's worth of Nucor steel as effectively. So you're taking one steel producer, one of the big ones and taking everything that they can produce. So, I mean, that's, that's a really simple math equation and it, you know, you, can't the other thing.
[00:34:12] So this, so my wife's a geologists and the thing. On the other side of this, right? You need to pull or out of the ground to produce steel. And in the U S mining regulations are insane and in California and STAM near impossible to start a mine. So this is, and that's why like Elan is going and creating lithium and nickel mines in Nevada where mining is accepted and the deposits are there.
[00:34:39] But, um, Is to, to own that full supply chain because you know, you're not going to the other big place for lithium is in China. So, and well, there's some other Africa and other places throughout the world, but relying on that and at the rate you're going to produce, you'd need to own your own pipeline and be dedicated for you.
[00:35:00] This is actually why back, you know, a hundred years ago, Carnegie Koch cook fields, cook mines. I mean, they owned it all. And they fed their own plants for this and most of the steel companies do not own their own like mining operations. So this is, they just like new core just as steel and just in their mini mills.
[00:35:22] Um, so this is the other thing to think about in the supplies you can't, and you can't ramp up like mine operations. You got to go and dig that stuff out of the ground to then, you know, run and put it through a steel mill. I mean, that takes years a lot of dirt to move. And it's frankly, more the permit process.
[00:35:42] It's going to take you three to five years to get through, to do this. So this is the other thing to think about is, and a lot of this was the Amar, like the environmental act in 69. A lot of this stuff got put in there. So the other thing, and when we look at supply for wood, so with all the fires, everybody was talking about it.
[00:36:05] Especially in California in the West about logging and, you know, can you do it all this stuff? And I spent the time and trace back how this came about, like why, why don't we log what's? What really happened? It was the environmental protection act in 69 that really started it. And then they dropped permits off for logging in national forest land.
[00:36:27] Which is why a lot of the forest burn, cause now you've had, um, so 1990 they dropped from 10 billion board feet basically logged a year to 1 billion board feet. So you dropped 90% of supply, I mean, overnight out of the forest. And then from there. So now you had 30 years of tree growth, which in most places that's a pretty good sized tree, you know, a 60 foot tree.
[00:36:55] So now it's perfect. Ken Lang for any, any fire to rip through. So that's the other side of this is when you start to look at like, true, true. So like, where are you getting this stuff, right? You've gotta, you gotta log a tree. If you want a house, you got a mind, some ore and pull some stuff out of the ground.
[00:37:13] If you want steel you gotta, you know, not everything's dirt and clay, but a lot of that rock to go into cement is pulled out a rivers. You know, we're not, we don't care about the fish if we're going to do that. So it's, what do you want and understanding where, where do you get all your stuff? Like where's your water come from?
[00:37:32] Where's the, all the material come from to build all this stuff. And I think oftentimes just like when we talked about the markets, oftentimes people lose sight of where all these materials come from and what goes into, you know, building effectively a building, right. I like these trees to come down so I can have a house, take your pick right now, not living in a tent even then, like, where's that mind?
[00:38:00] Well, and you bring up a really good point and one that frankly I hadn't even touched on or hadn't really thought about, but I hope everybody heard that to get a permit, to increase your mining operation or to start your mining. You're looking at a huge timeline, right? Two to three years. Lots of money to average and a ton of money.
[00:38:19] Let's just look at, let's look at the time. So let's say it's three years to get a permit just to mine. It, you still then got to set up operations. So that's probably another, I'm not a minor six months a year before you're really fully up and operational. Yeah. It depends on what you're doing. So, um, and where the light shafts are.
[00:38:39] So if you're doing, let's just call it open pit mining. Which is a little easier to do than like an underground like coal, um, cause you're just looking at the specific vein. So in precious metals, you can do a little bit of both. Um, it just depends on what you're going after. So a lot of copper mines are, cause you're looking straight for the vein.
[00:38:59] Um, and not just the rock. So typically they'll do underground because then they can go right to the vein and they just follow it all the way down. Um, so in a lot of that, it can take. Take a long time to set it up to do power. so like Justin tid was on here. He works, um, for Becker global and they do a lot of the power systems that go into, um, you know, coal mining or another mining operations.
[00:39:24] So, and then it depends on what your plant is above on how you're going to process it. But yeah, let's just say, let's say three years to get permits. You gotta go through legal and you know, everybody fighting to. Even start the mine or whatever. it depends on where you are, right? Like you don't, this is an America we're talking about America.
[00:39:43] This is not like, you know, middle of nowhere Africa or, I mean, most of the mines are middle of nowhere like Nevada, right? Nobody lives there. No, one's even close to live in their middle of nowhere. Like they're not people for days in the places that we were talking about and, you know, Nevada, Utah, Arizona, um, which is where a lot of the mining is even in.
[00:40:06] So you've got that, but in, in the U S years to do that legal permits, arbitrary, you know, whatever you got to go through to do that. And then let's just call it another year to, once you finally get it to set up the plant. Cause then you're, you're talking about all your processing equipment to, to go through that.
[00:40:24] And then probably another year to two, it's going to take a decade to get a mine online and hope you don't go out of business and you have enough money to get you through. That's just, it that's my point. Right? So you're talking a decade. Think of the shit that just happened in the last 10 years to try and say, we're going to, we're going to ramp production by, by starting a new mind.
[00:40:46] You know, why aren't these guys mining more? Why aren't the mills? Because it takes time. It takes too much time. We, you can't, you can't solve the problem. Once, once the dam breaks, you can't start trying to put your finger in all the little holes you gotta to it way, way ahead of time. And. 10 years. That's amazing to even think about it.
[00:41:06] It's almost incomprehensible. How do you, how do you plan and forecast economics 10 years out in advance? Because again, I don't know anything about mining, but I also know it's not cheap, not by a long shot. So if I'm going to sink my money and start you know, the veteran mind somewhere, how the hell do you plan for that?
[00:41:26] How do you even project it? Talk about taking risk and talk about investment opportunities and, and. It's just it's mind boggling to me. Yeah. Like. so I've discovered this, the visa app and going through it, there was, there was a mind for sale in, again, middle of nowhere in Nevada, it was a gold mine, and it was like 45 million for 20 acres, I think.
[00:41:52] and it was supposed to be a goldmine. And I told my wife about it. She's like, nah, that's end of life. Like, if it's that cheap, it's not, not worth it. Um, and I was like, Wow. Like, think about that 45 million end of life. And you probably, or there's no like true deposit there. She's like, that's cheap for, for my, I almost like $45 million for a piece of dirt and 20 acres.
[00:42:23] Like we're talking 20 acres, it's got the mining permits on it, but like 45 million and then you'd probably have to sink another a hundred into it to get it running. Like. I mean, yeah. Jesus. And that's why they say in mining, it's the third mine operator that actually makes money. The first one, first one gets the permit, builds it and they go bankrupt.
[00:42:48] The second one, can't figure out how to operate it. And then the third one comes in and actually makes money. So let's adage in in mining, but yeah, I mean, this is, again, you got to think of where all this stuff comes from, right. To affect price, to build things. And far too often, Most people don't know where, where it comes from, you know, like, and then they're against, against mining.
[00:43:13] They're against you know, logging they're against whatever pulling rock out of the stream because it hurts the salmon. It's like, take your pick, man, what do you want? Do you want a house? Cool. This is what we got to do. Do you not fine? Go live in a tent. Most of those environmentalist's live in pretty nice houses.
[00:43:34] Take a pic. Yeah, I just, it, a couple of salmon have to be moved, relocated, pushed out of their homes to, to build houses. That's kind of the food chain. That's, that's the nature of, of economics in human existence. Yeah. And again, it's, it's just going back to the root cause. Right? A lot of this is not difficult.
[00:44:02] It's not hard. Just trace it back. Where's it coming from? You know, the pricing, like there's a lot of theories and, you know, we've gone into some of them on you know, supply demand, all those issues. But at the end of the day, price is said at the commodities level, right. It's set at a market rate that's globally manipulated and it's manipulation, right?
[00:44:25] Like it is the price is manipulated on a daily, on a second by second basis. So. And it's not, it's not your guy at ACE hardware, right? Your local guy, your local ACE hardware, lumber yard is not like they're riding the wave with you too. And you know, it's not, not on them. So don't at the end of the day.
[00:44:48] Like, you know, if you want to get mad at somebody it's the market, but this is where price gets set for futures. So it's the world that we live in. Honestly, unless you're going to start playing the market with a lot of money and I'm talking billions you know, there's really no nothing that you can do about it.
[00:45:07] Other than we can all collectively talk about it and understand why this is happening, but to blame your suppliers, to blame anybody in the construction industry to blame a distributor on price, they're riding it just like you are. So other than, you know, having some understanding and some empathy. Or a lot of money.
[00:45:29] You're not going to be able to, to affect it a whole lot. Yeah. And that's just, it, it's gotta be open communication. You gotta, you gotta be friendly with people. I mean, I I'm no scholarly researcher. I get a lot of my information on the steel markets from a very select few people that I talk with on a regular basis that I, that I trust and that I value their opinions.
[00:45:51] If we all just are open about it and keep talking about the issue. That's that's step one. It's, you know, it's, it's like AA for construction. You got to admit there's a problem. You got to start talking about it. Yeah. And so this is, this is a big thing in price, man is, um, be open. Charge your full weight, you know, put your markups on it, put your timelines on it.
[00:46:18] This, the other thing that we're seeing, right. Holding pricing for 24 hours, I don't blame them. Right. And they're honest about it. Everybody's upfront about it and I love it. Right? Like I love the honesty. I don't love the price increases, but I love the honesty. So if we can all get on that same train of.
[00:46:40] You know, this is, I, I can't tell you any different. I got 24 hour holds on stuff. If you want it today. Great. If not, you know, check back tomorrow. It is a as a tough row to hoe though, my friend, I can tell you, and I'm not a salesman, but I sell a lot of stuff. 24 hours is not much time to do it. It just isn't.
[00:47:04] It's tough. And it's tough on everybody though. You know, you're going to start seeing pricing, escalation, clauses all over the place in contracts and they have to be there because we all have to protect ourselves from the top to the bottom side to side. None of us do any good if we go away. No, and, and that's a great point.
[00:47:25] So everybody needs to be reviewing their contracts. Everybody needs to be putting that stuff in there. Um, You need to be charging your full weight, you know, no discounts it's, you need to make, you need to make a profit, right. And you need to hold that line on, on making money and throughout this entire thing and pricing, it's a, it's a good exercise that everybody's going through.
[00:47:51] Everyone understands the market, or at least that it's insane. Um, I would say that we, we fully understand it, but at least that we, we can. I'll be in it together on riding through this. And then again, having that open, honest communication and Hey, this is what I'm doing. This is what I'm seeing. And these are my markups.
[00:48:13] This is, I need to make money to to, you know, live and go to the next one. This is not, not for free, um, and not be afraid to share that. Like, Hey yeah, I'm making money on this. Good, right? Like, hope you're going to make money on your subdivision or your shopping center or your office building, like you're in this to make money too, buddy.
[00:48:35] So let's be upfront here. Yeah. It's, it's kinda related to like a NASCAR driver, right? When somebody crashes in front of you, you're trained as a driver to drive straight into the black smoke. And as long as we all drive straight into the black smoke, most of us are going to come out the other side it's it's when companies start looking at the wall and spinning out and crashing that, you know, stuff starts going South real fast for all of us.
[00:49:03] So hold the line, aim for the smoke. Yeah. You've got to have the conversation. You got to talk about the money and you got to do it sooner and that's just that you can't avoid this one, right? You can't avoid that conversation if you do. You're going to crash. Um, I think we all see that. I hope, well, Dylan, my friend, we're coming up on time here.
[00:49:29] I got to go because I've got pricing. That's expiring in about an hour. So with that, um, I'm going to ask at this time, if everybody listening can, can like the show, share it around, you know, spread it on your social media channels. Help us out here. Comment in the comment section and let us know how you think we're doing.
[00:49:50] If you want to hear anything different or have anyone else on the show, or if you want to be on the show, get in contact with me or with Dylan, we're both fairly easy to find and we'll keep this thing going. Awesome guys, have the conversations, share the show, give us a, like, rate us on iTunes, all that good stuff.
[00:50:10] And we'll see you back here next week for another live show and we'll see what the dogs do so well next time.