Lately, the scrap metal industry has been experiencing low prices. It is no surprise that scrap metal prices fluctuate, and this has been a source of frustration for those looking to recycle scrap metal. The price of scrap metal is affected by a multitude of variables, with some pulling up on the price while others pull down at the same time. The calculation of all these variables to determine their effects on the price of scrap is complicated, but we have simplified these effects so you can have a better understanding of why these prices change and when the best time to scrap is.
Metal Supply and Demand
The economic laws of supply and demand rule the scrap metal industry. If demand is high, then prices will increase. For example, during a housing boom, the demand for copper increases, thus causing an increase in its price. When the demand for metal is low, prices will also be low. This is often the case when we are experiencing a housing bust or a recession.
The supply of metal also impacts scrap prices. Some metals are more common than others, meaning there is a larger supply of them in the market. Because these metals are easy to find, their prices are low. For example, there is an abundance of aluminum, so the price of aluminum scrap is much lower than the price of more rare metals such as gold or copper. When supply is low, prices are high because the metal is more difficult to find. Keep this in mind when you are thinking about selling scrap. The ideal time to sell is when the supply of metal is low or when the demand is high because this is when the prices will be highest.
The Price of Virgin Metals
The price of scrap metal is closely tied to the price of virgin metal. Scrap metal prices increase when virgin metal prices increase. This is because when the prices of virgin metals increase, manufacturers look to use scrap metal instead due to its lower production costs. This increased desire for scrap metal causes its price to go up, following the law of demand mentioned above. The market for scrap metal follows the same trends as the market for virgin metal because it is a substitute product. People would rather buy scrap metal than virgin metal when prices are high because, even though the price of scrap will be higher, it is still cheaper than the price of virgin metal. Individuals who want to sell scrap metal will benefit because scrap metal recyclers are able to pay them more for their scrap when there is a greater need for it. If you want to sell your scrap metal when prices are high, watch the trends of the virgin metals markets.
Scrap metal recycling is a major business in the United States and in other countries. The US imports metals from other countries, and many US scrap recyclers will ship their scrap to other countries to have it melted down and processed before having it shipped back to sell to manufacturers. The costs of importing metal from other countries greatly affects scrap metal prices in the US. When importation costs are high, manufacturers may seek out domestic sources of metal. This can cause the price of scrap metal in the US to increase because the domestic demand is higher. On the flip side, if importation costs are low, then scrap prices may decrease. Metal tariffs affect scrap metal prices because they can cause importation costs to increase or dissuade other countries from shipping metal to the US.
The economies of foreign countries also affect importation costs and the demand for scrap metal. China is one of the biggest influencers of the scrap metal industry. The Chinese market, along with other Asian markets, has recently been experiencing a drop in its economy. This means they are not contributing to the worldwide metal market as much as they have in the past, which has disrupted the scrap metal industry in the US as well.
Fuel prices are the greatest influence on scrap metal prices. When the price of fuel goes up, so does the price of scrap. This is because the process of recycling metal is so dependent on fuel usage. Fuel is used to heat metals to melt them down and to make different products. The high heat needed to heat metals can be produced from coal, natural gas, or electricity. When the costs of these go up, so does the cost of metal. Gas prices also affect the cost of transporting scrap metal and metal products. The higher the transportation costs, the higher the cost of metal. The opposite is also true. When fuel prices are low, so are scrap metal prices. When considering selling scrap metal, pay close attention to fuel prices to know when the best time to sell is.
Selling Scrap Metal in East Tennessee
It’s no secret that scrap metal prices are currently low. This is due to a combination of the above factors. When you are looking to recycle your scrap metal, you can predict changes in scrap metal prices by looking at changes in supply and demand, virgin metal prices, importation costs, and fuel prices. If you are ready to recycle your unwanted scrap metal, Roane Metals Group is ready to help! Drop by one of our two convenient East Tennessee locations, or give us a call at 865-354-4282 to find out more about recycling your scrap metal.