Why do Scrap Metal Prices Fluctuate

Written by Brian Sedasky
Published on the 24th of January, 2023

What you need to know about scrap metal pricing

Both scrap metal and the stock market have several similar characteristics. One of them is that both markets are volatile. Scrap metal prices will change by the minute, hour, day, week, month, or year depending on a variety of market factors. So, recycling facilities and sellers – alike - have to stay informed on these market movements to ensure profitability.

Another thing I’ve learnt about scrap metal pricing is that scrap yards are not the only people influencing scrap metal pricing. In fact, they depend on market pricing from industry experts that research these prices on their behalf, such as our site, https://priceofscrapmetals.com/.

Once scrap yards get the average price of scrap metal, they’ll also compare their prices with that of other facilities around them to determine a fair price for scrap metal on that particular day. They’ll then update the information on their website so that sellers will know how much money they can expect when they sell their materials.

The scrap yard will also hang a price sheet or chart for basic scrap metals at convenient locations within their facility to help sellers know how much money they can expect from the scrap metal they sell.

Here’s a video showing you what to expect to find in a scrap yard when you take your material.

Which factors, exactly, determine these price fluctuations?

Several factors will cause price fluctuations in the scrap metal market. They include the following.

Demand and supply of scrap metal prices

The law of demand and supply plays a significant part in pricing any product, including scrap metal. Whenever the demand for that product falls, prices fall because supply is high. When the demand is high – on the other hand, the prices tend to increase because supply is low.

When scrap yards buy your scrap metal, they’ll sell it to larger scrap yards, mills, or processing plants. These facilities then turn these metals into new metal products. For instance, they’ll use recycled copper to make electrical cables for home appliances. Recycled steel is used in construction and automobile manufacturing.

At certain times, these processing mills and manufacturers don’t buy as much. Hence, scrap yards have a high volume of unsold scrap metal because of the low demand. It causes them to lower buying prices because they have a large stock of scrap metal at their facilities.

On the other hand, when the demand for copper is high, there’s a likelihood that supply is low. This means recycling facilities will pay more money to sellers that are selling high-quality scrap copper.

Economic factors

SIMS Metal Management, a multi-national recycling company, recently released an annual report indicating that economic factors such as increased bank rates lead to low demand for steel, copper, and aluminum - thus affecting demand for scrap metal prices.

This statement cannot be further from the truth. Analysts suggest that the economic climate has an impact on businesses – and that includes the scrap metal industry.

When bank rates increase, it causes inflation. In turn, the prices of commodities such as gas increase and changes consumer habits. People spend less money, affecting industries such as the automobile, electronics, and construction industries. These manufacturers no longer need to order large quantities of scrap metals because they lower the rate of production.

Eventually, scrap yards don’t have a market for these materials. That’s why they will lower prices in such times to cover the high cost of labor, transportation, rent, utilities, among other costs.

Gas and Oil prices

We reached out to a few scrap yards in different parts of the world to get a clear answer on this because many scrap sellers always wonder why scrap metal prices tend to be low when gas and oil prices increase.

The answer is that increased gas and oil prices don’t just affect commodity prices. They also have an impact on scrap metal prices.

Remember that scrap yards depend on fossil fuels, such as petrol, to run the equipment used to melt the metals. They also use large trucks to move the metals they collect to processing mills.

Therefore, scrap metal prices will be low whenever there's a surge in gas and oil prices because of these overhead costs. Hence, at this time, the scrap yard will offer to buy your scrap metal at a lower amount than usual to ensure that they get a reasonable profit.

Global and domestic events

Events such as elections, conflicts (both domestic and international conflicts), and pandemics can dictate how the scrap metal market prices are going to be.

Let’s take COVID-19 as a good example. When the pandemic hit, its effects on the scrap metal industry were huge. People had to retreat to their homes for months. Manufacturing and construction activities dropped significantly, meaning demand for scrap metal was low. Some scrap yards had to close down their facility because there were no scrap metals.

However, as different countries started to re-open their economies in December of 2020, demand for scrap copper – for instance, started to increase, which caused a significant increase in the market prices.

Domestic events, such as general elections, also affect scrap metal prices. At this time, numerous stakeholders tend to postpone decisions and prices in commodities tend to increase. In turn, this affects the scrap metal prices.

The Russian-Ukraine War has also had an impact on scrap metal prices, especially scrap steel. Due to this, analysts predict that scrap steel prices will continue to fall in the fourth quarter of 2022 because supply is high but the demand is low and scrap yards are finding it difficult to get new markets for scrap steel.

Watch this video to learn more about steel prices around the world.

Introduction of new policies

In a previous article on the basics of scrap metal recycling, we highlighted that scrap sellers needs to understand the rules and regulations of the state they live in to make money with scrap metal. But how do new policies affect scrap metal prices?

When governments tighten the regulations, price fluctuations occur. A good example: when China decided to ban scrap metal imports in 2019 because the Chinese government wanted to reduce carbon emissions by 2030.

The impact of these restrictions wasn’t minor. Given that China imports millions of tons of scrap metal – especially steel, sellers from the United States and Australia had a lot of unsold inventory in their facilities, which caused the scrap metal prices to drop.

If you went with scrap steel to any scrap yard in the United States at this time, they’d probably not take it; alternatively, they’d buy the materials at a low price.

Time of the year

The three industries that use recycled metals the most are manufacturing, construction, and technology. In our research, we noticed that activities around these three industries play a huge role in determining the price of scrap metal.

For instance, car sales are very high during spring, and this is the time when most automobile manufacturers release new car models. During winter, the opposite takes place. Car and auto part sales are low, which influences scrap metal prices because the demand is low.

It’s the same case with construction. Construction companies are very busy during spring and summer. In the cold winter months, nothing much happens in this industry. Hence, there’s a probability that scrap metals such as steel will be in low demand, which affects the prices.

On the other side, we also noticed that winter months could also cause prices of scrap metal available in the market to increase even though scrap metal recycling is slow. This can happen due to a low supply of material and a slight increase in demand because of delayed transport and a low amount of scrap metal going to recycling facilities.

The location of the scrap yard

Scrap yards don’t offer the same scrap metal prices depending on several factors - one of them being their location.

When the scrap yard is in a large town – New York City, for instance - where there are a lot of manufacturing, construction, and technology facilities, selling scrap metal here will be profitable.

In a smaller city – such as Murfreesboro, for instance - where blue-collar activities are not widespread or where there are few scrap yards, getting competitive prices can be difficult. The prices for scrap metal are low, and you may have to drive to another city to get good prices, especially if you are about to sell a large quantity of scrap metal. Ensure, though, that you have a large quantity to sell if you have to drive long distances.

Again, we also noted that if the scrap yard is located far from the port, scrap metal prices will be low because transportation costs are high. That’s why scrap yards on the East Coast – for instance, New York and Rhode Island – will offer good prices than those in the Mid-West states such as Wisconsin and Kansas.

Price of virgin metals

Manufacturers that produce house appliances – for instance - will need a lot of copper for electric cables. The copper they use can come from either scrap metal or copper ore – although scrap metal is the most environment friendly option. Before making any purchase, they’ll have to compare the prices of scrap copper and raw copper to determine the most affordable option.

If raw copper prices are lower, they’ll definitely prefer to buy large amounts of copper ore. The causes a fluctuation in price since this directly influences the demand for scrap metal.

What to do when prices are low

Scrap metal sellers who would like to build a lucrative career (or business) out of selling need to update themselves on scrap metal prices all the time. You can follow our website for regular price updates for countries such as South Africa, Canada, the United Kingdom, Australia, etc. You can see the full list on our home page.

If you check the market prices and notice that they are low because of – let’s say – a temporary situation such as the winter, election, or demand, the best thing is to hold on to your scrap metal and wait for the prices to go up again.

However, if there’s a lot of uncertainty on whether prices will go up or down, don’t wait. Sell your materials before prices bottom out. The trick here is to call different scrap yards to identify the ones that’ll buy your materials at the best price.

Ensure that you deliver high-quality scrap metals at all times to attract good prices even when the prices are low.

Final Remarks

That’s it for today. We hope you have all the information you need on why scrap metal prices fluctuate regularly and how to react when prices are low. If you have any question about scrap metal prices or anything to do with scrap metal, don’t hesitate to contact us.