Why Are Scrap Prices Changing? If you find yourself asking any of these questions, we have some information on why it’s not easy to predict scrap prices or there is a reason why they’re changing.
Scrap Prices. It is probably the number one issue in the scrap metal industry. Most of the questions the Implementation Team receives via email and social media are usually about where the scrap metal market is heading and where the prices are. That’s one of the reasons we have our Series of Weekly Scrap Price Reports where we talk each week about current prices, markets, where prices are and what to expect going forward. While keeping you up to date with what’s going on in the scrap market, we explain why scrap prices change.
Why Are Scrap Prices Changing?
There are several factors that determine how scrap prices are determined. These factors determine how often or less often these prices will change. Below are some reasons why scrap prices change Why Are Scrap Prices Changing?.
Worldwide Reasons for Changing Scrap Prices
Market Demand – Like anything in the world, prices can go up if there is a higher demand for metals for projects. Projects such as infrastructure improvements, construction, product manufacturing, or other products that require metal may be accelerating efforts. The metal types demanded can be completely different depending on the industry. For this reason, sometimes scrap prices rise, while copper prices fall on the same line.
Example: If there is demand for more cars to produce recycled steel and aluminum, it may cause scrap prices to rise slightly as these industries need the material.
Stock Stack Levels Are Varying – Countries like China and India are often the hubs for recycled metals in the world. If there are too many metal stocks in these countries, they may not want to continue buying, so prices may drop. Or, on the other hand, if countries realize they have too little scrap metal, they may be willing to pay more to bring it home and prices may rise.
Example: After the 2008 Recession, the scrap metal market fell. Some countries had a lot of scrap stock but no one was using it, so it just stood there wasting space. This has caused international countries to lower prices significantly, as there is much less demand for scrap metal.
Market Requirements May Change – Some countries that purchase most of the world’s scrap may change the way they purchase or classify materials. Sometimes the way certain metals are processed overseas is slightly different than in North America. Larger markets that purchase most of the world’s steel, copper or aluminum may change the way they separate or classify materials. This change may shock the market and cause scrap prices to change.
Example: In late 2017, China decided they didn’t want to continue collecting “the world’s garbage.” Therefore, they began to refuse to buy scrap copper wires and cables, which did not bring good returns. So wires like Romex and normal insulated wires were no longer imported and bought in China. This change caused scrap wire prices to fall because it was more difficult to dispose of material globally.
Local Reasons for Changing Scrap Prices
Shipping Costs Varies – Scrap prices can vary locally, for example due to oil or fuel prices. Scrap yards have to transport scrap metal to larger sites or ports. Because it costs more to get a truck on the road, yardage prices can go down. This will enable them to make a difference with the materials they purchase.
Competitors – Scrap metal recycling is a competitive industry. There are more junkyards competing with each other in the busier metro areas. So, as in any industry, the presence of competitors can change prices depending on how they buy the scrap. If scrap yards are fighting for customers in an area, this may cause some to raise prices more than their competitors.
What You Can Do to Track Scrap Prices
Similar to the stock market, the scrap metal market is constantly changing due to many external factors. In general, there is no single reason for scrap price changes to change. To keep track of where scrap prices are going, the best option is to follow our weekly reports on Facebook, where you can ask questions live. Another option is to check the current scrap prices and locally reported metal prices. Also, sign up for our emails with weekly reports and news on the scrap metal market.
