Your system generates scrap material every day after the manufacturing or consumption process. And for years, you might’ve been following this procedure to scrap metal: calling a scrap company, deciding the price, sending the filled containers, and then getting paid for your metal. For you, this might be the best way to handle the scrap metal.
But, only some manufacturers know selling scrap metal the right way could be another source of profit for them.
Everyone selects a particular scrap company for various reasons including lower prices, better services, or just transparency. But most of the scrap companies would buy very low and sell high. Hence, as a seller, it is important to understand the value of your scrap material and how to get the right value for it.
So, we’ve gathered the steps to help you make the most out of your scrap metal.
- Fix the Settled Price
In the fabrication industry, selling scrap metal isn’t a one-time event. Therefore, it is important to make sure that you don’t end up working with a company that tempts you with an above-market price, and after that gradually lowers your per-ton rate to a below-market price.
You need to make sure that you tie the pricing to a defined commodity-market index. This way, you can protect yourself when the market falls and benefit when there the market rises. The decided upon index prices are generally not similar to the negotiated price for the scrap. So, when you negotiate, you are basically negotiating the differential price. This means there will be a difference between the market index price and the amount that the scrap company would give you. And when your prices are tied with the market-index, the scrap company won’t be able to freewill their way around the prices. So, make sure that when the index goes up to $20, the scrap price should also go up by the same amount.
- Be Aware of the Downgrades
It is a common industry practice to pay for the least valuable scrap material in a load. If the load contains 90% stainless and 10% some other material, the less expensive material would be graded. Looking from an ideal point of view, the payment should be based on the percentage of the material in a load. For dirty loads, downgrading the scrap amount is certainly fair, especially if a dirty load increases the amount of segregation work. Hence, if a scrap company downgrade a load, ask for proper documentation. Make sure that there is an agreement to send documentation and pictures for any downgraded load. If you communicate with the scrap company about how it handles dirty loads, you will understand how it operates.
- Separate the Scrap Pieces
This technique is all about maintaining transparency. This process includes everything that happens to the scrap before it’s sent to the mill. It includes shipping, processing costs, and other value-adding process costs. For instance, you get a pallet of metal pieces after a laser cutting process from a machine containing Amada parts or Bystronic parts. Before you put them for buying, they must undergo a number of value-adding steps. You need to segregate them by type and cut down to a mill-acceptable size.
Just like that, steps may vary depending on your exact material mix and requirements. It depends on your own processes and the price increase that a scrap company is willing to give you. It might sound like a complex process, but remember that just like the production, scrap is also a revenue center, so it’s worth organizing it with a process.
- Keep Track of the Load and Tracking Reports
Usually, the truck arrives at your workplace, retrieves your scrap, and leave a pickup receipt and scale ticket at your dock. After a certain period of time, the concerned person would deliver them back to the front office. But it is not necessary that all those pickup receipts make it into the main office. You need to verify the number of loads that left the facility and for how many of them you received the payment. Keep one responsible person to take care of this process. Especially, when you scrap aluminum, stainless, or other high-value materials. Because each load can account for thousands of dollars.
Summing it up...
Handling scrap material isn’t rocket science. But it is important to understand the process, market, and of course, having a basic knowledge of the industry prices won’t harm. If done right, just like you produce products using Bystronic parts or Amada parts, you can turn scrap into a valuable profit-making product.