Why Do Scrap Prices Fluctuate

Why Do Scrap Prices Fluctuate?

Scrap metal prices vary daily based on current market trends. This can make it challenging for metal scrappers to time their market entry point. Pricing for metal scrap is affected by a multitude of variables, but you obviously want to get the biggest return for your materials.

That said, calculating what causes the prices to swing up or down can be a complex process. This guide will break down the causes that keep the pendulum of scrap metal pricing swinging so you can determine the best time to recycle your metal scrap.

What Affects Scrap Price Fluctuation?

Instability in scrap prices has become a prominent concern for scrap metal recycling stakeholders. Below are some factors we will analyze and their impact on scrap metal pricing fluctuations:

Supply and Demand

Many of us are familiar with the economic tenets of supply and demand that rule the scrap metal industry. When there is more demand for a particular type of metal, prices for that metal can be expected to increase. This is likely to occur during a housing boom or other major infrastructural development projects when demand for metals like copper, steel, and aluminum increases.

Conversely, when demand for a metal is lower, prices can be expected to be set at a lower overall value. This situation is more likely to occur when production across manufacturing industries comes to a halt due to outside forces. In China, for instance, isolation practices during the COVID pandemic caused building and road development to come to a standstill, lowering metal demand.

Supply also impacts scrap prices. More common metals are more readily available in a larger supply. The lack of scarcity means prices for the metal typically run lower. For instance, metals like aluminum are easier to find and have a lower value compared to harder-to-find metals like copper.

Alternatively, when there is a lower supply of a metal in a market, especially if it’s in high demand, the price can be expected to increase. Rare metals that are more difficult to find fetch higher prices.

Remember these tips when deciding to sell your metal scrap. Word to the wise — it’s best to leverage your metal scrap when demand for the metal is high or the supply is low so you can receive the highest payment for your metal haul.

It’s also worth noting non-ferrous metals like copper, aluminum, brass, tin, and zinc alloys tend to be in higher demand with a less readily available supply. Pound for pound, this makes them more valuable than their more commonly found iron-containing ferrous metal counterparts like steel.

Fuel and Transportation Costs

Fuel prices significantly influence scrap metal prices. A rise in fuel prices correlates with a rise in scrap metal prices. This occurs because the scrap metal recycling process is fuel dependent.

Fire or heat is necessary to melt metals down to be reused. Fire requires three elements: oxygen, heat, and fuel. Coal, natural gas, or electricity are all fuel sources used in scrap metal recycling. Furthermore, melting scrap metal requires a high amount of heat, which means more fuel is needed to sustain metal-melting temperatures. When the costs of fuel-producing resources go up, so does the cost of metal.

Gas prices also impact scrap metal transportation costs. Higher transportation costs result in higher metal costs and vice versa. That’s why you’ll want to be mindful of fuel prices to establish the most optimal selling point for your metal scrap.

Currency Exchange Rates

Base metals prices can experience high volatility based on what’s happening in global market exchanges. Fundamentally, ever-shifting exchange rates mean the prices of goods and services in the commodities market are in constant fluctuation. The value of imported goods and raw materials will adjust in alignment with currency exchange rates. Essentially, these rates are indicative of an economic ripple effect that is present in inflation, construction, and manufacturing industries, and even the real estate sector — all of which rely upon metal usage.

Local Factors

Other local factors beyond fuel and transportation costs can also profoundly impact scrap metal pricing. Scrap yards in closer proximity competing with one another may incentivize them to offer higher prices for metal scrap.

Geographic location is a major predictor in which process is chosen to refine metal. Residents of places where long-distance transportation is necessary may receive lower overall prices for their metal scrap. Areas where the cost of doing business is higher can also result in lowered metal prices.

The way in which the metal is locally processed can also affect pricing. Smelting, the process of extracting metal from its ore using heating and melting, uses a different pricing structure. Electrometallurgical processing, which uses electricity for metals recovery, also has its own unique pricing formula. Ultimately, the way your local scrap yard recycles the metal can have a huge impact on how you’re compensated for your metal scrap.

Taxes and Tariffs

Importation and exportation costs can affect your scrap metal deal. Even your local scrap yard is part of the worldwide metal industry. Scrap metal may even be collected from one location and shipped to be melted down for manufacturing in another location, globally or domestically. High importation costs can lead manufacturers to seek out local sources of metal causing a rise in scrap metal pricing. Lowered importation costs can cause a decrease in scrap metal prices.

Metal tariffs have an impact on scrap metal prices because they can raise the cost of importation or deter other nations from sending metal to the U.S. Adding to the complexity, scrap policies vary from country to country in how materials should be purchased or classified. This can have a tremendous effect on scrap costs.

When Are Scrap Prices the Highest?

Scrap prices for metals are at their highest depending on the time of year and type of metal. Metals like copper are rare and in high demand, so they fetch a higher price. Somewhat intuitively, demand for scrap metal is higher in warmer months when more construction can take place. During colder or rainy months, there may not be as much of a demand for metal supply, which in turn, lowers the costs.

When Are Scrap Prices the Lowest?

Apart from the weather, world markets, and processing costs, scrap metal prices are also determined based on the condition of the metal. Corroded metal or metal mixed with other material residues could likely result in a lower price for your scrap metal. On a larger scale, economic recessions and global conflicts can disrupt the global supply chain, causing prices to go down.

Get Paid for Your Scrap Metal

Gardner Metal Recycling offers scrap yard services that can be customized according to your scrap metal recycling needs. For over three decades, our team of scrap metal recycling specialists has serviced the metal recycling community of Austin. We know our community expects fully transparent, fast, easy, and most importantly fair pricing for their scrap metal haul.

Time and time again, Gardner Metal Recycling has successfully delivered on that promise. To keep up-to-date with scrap metal pricing trends, check out our monthly newsletter, or contact our team today to find out how you can get the best price for your metal scrap.