Instability in scrap prices has become a significant concern for both scrappers and stakeholders involved in the scrap metal business. Every year, over a million tons of scrap, is recycled by recycling facilities around the world. However, with the industry flourishing, there has also been a sudden recent fall in the scrap price as well.
If you are new to the scrap metal business and wondering why the prices fluctuate so much, you have come to the right place! In this blog, we are going to discuss the various factors that have contributed to this phenomenon.
1) Supply And Demand
Prices are bound to rise if there is a high demand and a low supply of the product. It is the same with the scrap industry. When there is a higher demand for metal for projects, the prices can go up. But, because of increased awareness and efforts to go green and recycle, as well as many new scrappers entering the market, supplies have grown. In the last 6 months however overseas demand has decreased. Because the value of materials has significantly decreased, there is less demand which reduces the price further.
For example, if there is a demand for more buildings to be produced, scrap prices of steel and aluminum could go up because those industries need the material. Rates however may differ across a globe.
2) Stockpile Levels
Nations like China and India are some of the major purchasers of scrap metal in the world. If these countries have too much scrap metal stockpiled, or in the case of China have the ability to process their own scrap profitably; they may stop buying more metals from other countries. This would result in an inevitable drop in the prices. Vice versa, if they have less scrap metal than their requirement, they will want to buy more scrap metal from other countries, which would raise the prices.
3) Currency Exchange Rates
Currency exchange rates can sway the market. It is quite common for scrap buyers to switch the suppliers frequently. Countries with weaker currencies like Vietnam and Indonesia often change providers to receive the best price, causing waves in the scrap metal market. Given the state of the global economy, buyers are constantly re-evaluating their market options.
4) Market Requirements
The prices in the scrap metal industry also depend on the current market requirements. Countries that are prime buyers of scrap metal may change the way they buy or classify materials. Often, the way certain metals are processed overseas is a bit different. Due to this, there can be a blip in the market and the scrap prices may change. Some other reasons include a sudden inability to buy more metal. For example, Turkey is the primary purchaser of scrap steel, but because of political unrest, they are not buying material anymore.
5) Local Reasons
Various factors may affect the price of scrap metal. Scrap prices could change locally because of things like oil or fuel prices. Since scrap metal is transported to different yards and ports, with the delivery cost included, the prices may fluctuate accordingly. Another factor is competition. In busier metro areas, more scrap yards are competing with each other. Geographical location is another component of pricing. Some areas of the country do not export scrap but process it at refineries using a smelting process. This method would use a different pricing structure or formula. Therefore scrap prices are affected by which process the seller is closer in proximity too.
Many people feel that scrap prices should be increasing due to US import tariffs. However other aspects indicate other countries will reciprocate and place tariffs on the scrap being exported out of the US, causing demand and prices to go down.
In general, the scrap price changes for any number of the reasons listed above. The best course of action is to keep a track of the varying prices.
In addition to keeping track of the prices, you can also consult an expert on a matter! Our professionals at Bolduc Metal Recycling are knowledgeable and experienced and will offer sound guidance to you on how you can get the best price possible for your scrap metal.