In the scrap metal business, large transactions can be completed in very short periods of time. Careful identification of your scrap and thorough research in metals markets are the best ways to make sure you’re not left scratching your head when your receipts come in. If you learn to price scrap metal accurately, you will come to market prepared, which is your best defense against finding out what you bought wasn't worth collecting.
Properly Identifying Your Scrap
The first step in figuring out how to accurately price your scrap metal is to ensure you're identifying it properly. With scrap falling into hundreds of different ferrous (iron-containing) and nonferrous categories, simply guessing that “The red stuff is copper” or that “These car parts must be steel” isn’t going to get you very close to your scrap’s true value.
- Know Your Metals: A good place to start is with the Institute of Scrap Recycling Industries' Scrap Specifications Circular, which describes the internationally accepted specifications used when recycling virtually all types of metals.
- Break Alloys Into Weight Percents: If you are in possession of a crate of Monel 400 scrap, you should find out the composition of your Monel 400, which will contain at least 63% nickel and 29% to 34% copper and price the metals in the alloy separately.
- Use Analytical Instruments: Portable hand tools can identify the composition of unknown metals with surprising accuracy and speed. Handheld X-ray fluorescence (XRF) analyzers can be carried into the field and give accurate measurements of even trace impurities in scrap metal. Make sure to invest in the best tool you can afford so that you can trust your instrument without question.
- Factor in Extra Conditions: Though your buyer won’t care, you’re going to have to eat the costs of ensuring your scrap is in salable condition. Scrap dealers and mills will only accept scrap that is relatively clean and free of corrosion, so you may need a method of cleaning your scrap before delivery. You also have to consider the costs of collecting and transporting the scrap, which can have an especially big impact on your profits on lower-value scrap.
Being Market Savvy
The metals markets and associated publications are a great way to keep updated on scrap pricing based on both confirmed sales and futures trading. Involving yourself in the market as much as possible is the next step in gaining valuable information and bargaining skills.
- Consider Joining a Subscription Service: American Metals Market features news, editorials, and custom price reports with optional London Metal Exchange feed data for a reasonable annual fee. Scrap Price Bulletin offers a lower-cost source of prices and scrap news.
- Work With Your Local Scrap Dealers: Find out how they do their pricing for various grades. You may find that some dealers offer better pricing on certain categories and conditions of scrap due to the way they calculate or look up prices, or for logistical reasons.
- Be an Economist: Pay attention to the news and learn what affects prices. For example, consider and investigate whether a strike at a bauxite mine in Guinea will have an immediate effect on your aluminum scrap values.
The Real Costs for the Dealer
Every scrap dealer in the world can’t pay the same prices for the same scrap. First off, there is a price premium to use a broker instead of selling directly to mills. The level of premium should be tied to the quantity and quality of flexible services they offer. And keep in mind that scrap dealers must also factor in their costs of delivering recyclables if they are not near any end-users and will also be accepting responsibility for radiation screening and cleanliness.
Once you know how to identify and properly price your scrap, you will be able to much more accurately assess how best to spend your time searching for great scrap finds in your local market.