Factors Influencing Scrap Metal Prices

Here is a list of some of the key factors that affect the price of scrap metals.

• Demand and Supply
• Domestic Market Direction
• International Market Trends
• Prices of Virgin Metals
• Quality
• Quantity
• Production and Supply Chain Costs
• Climatic Conditions

Demand and Supply

Recycled scrap metals are extensively used in various industries including technology, construction, and transportation.The rise and fall in scrap metal prices correspond to the demand from these and other related industries.

A high demand and low supply situation will boost metal prices in yards. On the contrary, low demand and abundant supply position will result in lower scrap prices.

Domestic Market Direction

The scrap industry participants keep a close watch on movements within financial markets, especially the ticker symbols of major companies which belongs to industries regarded as primary consumers of scrap metal. The domestic metal foundries, mills, processors and manufacturers in the U.S. too play a key role in determining the prices.

International Market Trends

The scrap metal prices are largely affected by fluctuations in international markets, which are the important destinations of exported scrap metal. Any change in demand in primary scrap consuming countries like India, China and Turkeyis definitely going to impact prices. For instance, any fall in demand may result in a price dip, whereas boosted demand may lift scrap prices.

Prices of Virgin Metals

Another factor that determines the prices of scrap metal is the price of new metals in the market. In the event of notable rise in new metal prices, companies will switch to recycled metal, in line with their cost savings strategy. This in turn will result in higher prices to match the increased demand. Conversely, a dip in new metal prices will lead to less purchases of scrap metal, which in turn will lower prices.

Quality

The bad quality of scrap is yet another limiting factor when it comes to pricing. A scrap metal of lower quality contain high quantities of trace elements in it. The scrap yards will need to spend more resources to make them clean, before they could be processed for recycling. Clean and properly segregated scrap always fetches higher price, rather than unclean and assorted scrap.Scrap Specifications Circular by the Institute of Scrap Recycling Industries (ISRI) provides guidelines for buying and selling a variety of processed scrap commodities, including ferrous, nonferrous, paper, plastics, electronics, rubber, and glass.

Quantity

Generally, scrap dealers prefer bulk purchases of scrap metal, as it reduces their overall cost of procurement. It is advisable not to sell scrap loose, but accumulate them to a bulk quantity in order to get better price from dealers.

Production and Supply Chain Costs

The scrap metals are often transported from one scrap yard to another, during the various stages of processing. A constrained supply chain, fuel prices and dearth of adequate transportation facilities may lead to increased costs, thus affecting scrap metal pricing. Also, scrap prices are directly proportional to production costs, which mainly depends on labor costs and energy prices.

Climatic Conditions

The scrap metal demand is higher during warmer months of the year, as compared with colder months. The busier industrial activities during summer demand more recycled metals. The heightened demand would drive scrap metal prices higher during those times. Meantime, slowdown in industrial activity coupled with transportation constraints on account of icy roads will have bearing on prices of scrap metals, just like on any other commodity.