How to Price Scrap Metal
Maximizing Return by Calculating Real Values and Costs
In the scrap metal business, large transactions can be completed in very short periods of time. Careful identification of scrap, research, and market participation 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 thoroughly, you will come to market prepared, which is your best defense.
Identify Your Scrap
It may seem obvious, but the very first step in figuring out how to accurately price your scrap metal is to properly identify it.
With scrap falling into hundreds of different ferrous and non-ferrous categories, simply guessing that “The red stuff is copper” or that “These car parts are 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 Properties and Specifications section, which includes comprehensive materials profiles and other reference documents.
- Break alloys into weight percents. If you are in possession of a crate of Monel 400 scrap, you can find out the composition of Monel 400 (about 67% Ni and 23% Cu by weight) and price the Ni and Cu in the alloy separately.
- Use analytical instruments. Portable hand tools can identify the composition of unknown metals with surprising accuracy and speed. X-ray fluorescence (XRF) analyzers can be carried into the field and relied upon to 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 instruments 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 saleable 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 may experience difficulties in collecting and transporting the scrap, which can have an especially big impact on your profits on lower-value scrap.
Be Market Savvy
Based on confirmed sales and futures trading, the metals markets and associated publications are a great way to keep updated on the ins and outs of scrap pricing. Involving yourself in the market as much as possible is the next step in gaining valuable intuition and bargaining skills.
- Consider joining a subscription service. American Metals Market features news, editorials and custom price reports with optional LME 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 own 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, will the strike at that bauxite mine in Guinea have an immediate effect on your aluminum scrap values? How much? Would you gain more by holding onto your scrap and hoping for mill inventory depletion, or will the strike be over before you ever collect?
Consider the Real Costs of Your Scrap Transactions
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. Scrap dealers must also factor in the costs of delivering their recyclables if they are not near any end-users, and will also be accepting responsibility for radiation screening and cleanliness.
Once you understand how to identify and properly price your own 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. Good luck!