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Lessons from the scrap metal industry.
The scrap metal industry is one of dinosaurs.
Since 2012, I have worked for my brother full-time for the scrap metal business our Dad started in 1977.
Despite it not being a glamorous industry, it has a large footprint on the US economy – having an impact of $117 billion in the US in 2021 (according to ISRI.org)
That number should be taken seriously, especially when discussing a product and service that is a byproduct of other industries.
What is scrap metal recycling?
Some people may see junk collectors sifting through curbside trash and auto salvage companies selling parts, but that’s just the tip of the iceberg in scrap.
Scrap metal recycling and its materials can be categorized into three main sectors;
These are higher-valued metals that have specific applications and are non-magnetic. These metals are of higher value due to their complex mining processes, limited supplies, and non-corrosive characteristics. These metals do not stick to magnets. Some popular examples are:
Copper – which is used in electrical and plumbing systems
Aluminum – which is used in food, technology, automotive, and construction
Stainless Steel – which is used in medical, aerial, and food
These are more common metals that can be mined easily and are sturdier and heavy. They all derive from iron ore, which can be melted and shaped into I-beams that build skyscrapers, bridges, automotive parts, and more. These metals are corrosive and will stick to a magnet.
These are components from technology and originally was home to a large quantity of gold. In the 1980s and 1990s, my Dad was in the middle of the recycling rush of computer components like RAM and CPUs from the early computers with a significant amount of gold.
Today, these components do have gold, but a very minimal amount, as they are often made from aluminum or copper and have a gold plate on the outside.
Where Money Is Made in Scrap Metal
In the scrap metal industry, the main focus – like stocks – is to know when to sell and when to hold your material based on where the commodities markets are trading.
Lifecycle of Scrap Metal — a brief timeline of an aluminum can
An aluminum can is brought to a scrap yard.
The scrap yard buys the aluminum can(s), usually 10 pounds or more, from the customer for around $0.25–0.40 per pound.
Then, the scrap yard adds those cans to the growing pile of other cans.
The cans are then packaged (crushed and baled) by the scrap yard.
The scrap yard will then lock in a bulk price for a load of cans with a significant volume — so perhaps they sell it for $0.28–0.45 per pound.
A larger scrap yard buys the cans (following the same previous steps) or is sold directly to a smelter.
The smelter will load all the cans in large kilns, which melt all of them together.
The melted aluminum is then poured into ingots to create new aluminum products.
Recycling an aluminum can has the same recycled material back on the shelf as a new can in 30 days.
The key to making money in scrap metal recycling is ensuring scrap yards sell and buy materials when the prices are correct. Like stocks, metal prices are greatly affected by economic downturns and upswings. So timing can be a massive benefit to the players involved.
Knowing the market patterns is where the best scrap yard succeeds. That knowledge translates into the prices that scrap yards change and offer their customers to ensure they make the best profits for today’s market conditions.
This knowledge has been kept a secret for years…more on that later.
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