Why is my junk worth less money today?


02 June 2020

Views: 6

Here in our junkyards, one thing that we face more than anything is that customers ask us every time a junk price goes up or down. I've heard all kinds of theories about what affects scrap prices: from some sort of direct association with gas prices, to some sort of conspiracy theory about the owners' taste for the golf course. The fact is, most of the reasons for what could affect junk metal prices are found in the opening chapters of any economics book.

First, the most important thing that has an impact on prices is the most basic economic fact that exists: the laws of supply and demand. Simply put, most metal waste eventually ends up in factories and foundries. These places melt everything from your old bike, to your old hot water heater, to the old leaky faucet that you finally replaced last week. They take these waste materials and melt them down to produce raw metal materials to be used in the new production of goods. The more goods are produced, the more raw material manufacturers want. This creates a greater demand for these raw materials. When higher demand goes into effect, the available offer can be sold in a larger dollar amount ... especially when that offer has lower quantities readily available. On the other hand, if manufacturing is low ... and the demand for these raw materials is ultimately created from their scrap metal, this essentially creates a situation where there is more availability than is necessary. Therefore, the prices paid for this available supply are generally lower, considering that not much is needed for the decrease in demand. It's a fairly simple principle, but it really can be the single biggest impact factor on all scrap prices!

Launching another curved ball in all supply and demand is the participation of international markets and, therefore, another source of demand. For example, in preparation for the 2008 Summer Olympics in Beijing, China, there were a lot of new construction. The construction of the Chinese Bird's Nest Stadium was mainly made from recycled materials, and the construction of this stadium only had an impact on prices for more than a year. While production and manufacturing may be spiraling down here in the United States, there are still other possible factors globally that may have an immediate and strong impact on local scrap prices.

Another thing that can have an effect on your prices are simple and extremely local issues like trucking issues or other issues within your local scrap metal company. For example, if your local junkyard suddenly has a break in the relationship with the company they sell a particular grade of junk to, that could result in a loss of the profits they were previously able to get from this rating. While the guys behind the scenes may be working hard to establish a new and improved way to get this grade gain back; The fact is that in the meantime, this could result in a lower scrap price for that particular grade than you've gotten used to.

From my personal point of view and experience, the idea that there is a great scheme behind your local shipyard's scrap prices is simply not true. Scrap yards are businesses like any other, and they need a certain markup to pay the light bill, make payroll, and keep their doors open to continue to provide a service that enables you to earn money on your metal waste. Generally, this profit margin is a percentage that remains constant regardless of the current scrap price - after all, energy and gas bills don't go down with the scrap markets. At the end of the day, higher prices and better service attract more customers ... and believe me when I say scrap yards work hard to provide the best possible scrap prices for each of your customers every day,


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