Purchasers of Scrap Metal
Examples of purchasers of scrap metal are foundries, mills, mini-mills, brokers, peddlers, and scrap processors. The industry prefers either the term "facility" or "plant," be used to refer to their place of business, but you may also see the term "yard" used.
Operations of Purchasers
Scrap Processors (also known as Scrap Dealers or Scrap Recyclers)
Scrap processors collect, sort, process, and eventually sell the scrap metal to foundries, mills, mini-mills, and other purchasers. Most processors handle both ferrous and nonferrous metals but may specialize in either. Exhibit A identifies the properties of ferrous and nonferrous metals and their sources.
The equipment utilized by the scrap processor to process the scrap will vary with the type and volume of scrap the processor purchases. Most processors will have a crane that is either a traditional cable type or a hydraulic crane that is available on crawler, truck, pedestal, gantry, rail, or overhead mountings. Large magnets or grapples are attached to the cranes that lift and move the ferrous scrap. Processors may have a hydraulic baling press, an alligator shear, or hydraulic guillotine shear. Some processors have shredders that can turn an auto into much smaller pieces of scrap. Because shredders are very expensive machines, there are fewer in number. However, the shredders produce a large volume of tonnage. Additional equipment utilized to process the scrap might include scales, conveyors, mobile auto crushers, and the truck fleets and containers used to store and move the scrap from the originator to the end user.
When the scrap metal arrives at the processor's location, the scale operator normally weighs the scrap placed on the scale and creates a cash slip/weight ticket. The cash slip/weight ticket generally identifies the type of metal, total weight, price per pound (or per cwt. or per ton), total amount to be paid, and name of the individual or business selling the scrap metal. The cash slip/weight ticket is then presented to the cashier for payment. If the processor services businesses where containers are kept on the seller's premises, these businesses, often referred to as industrial accounts, normally will be paid once or twice a month.
The scrap market can be volatile. Even experts have a hard time predicting prices for any scrap commodity at any given time. For example, ferrous scrap valued at $100 a ton in one year can be worth $50 two years later and $130 the next year. In this market, the purchaser determines the market price. When demand increases for scrap metal, a higher price is offered to the seller. When enough scrap has been purchased, the price begins to fall. There is less incentive for the processors to collect scrap when the price is low because the profit is also lower. If the market price of scrap metal is low and processors can afford it, some may stockpile scrap and sell later when the market is more favorable. Thus, inventories may vary depending upon market conditions.
Most scrap processors eventually sell scrap metal to larger processors, foundries, or mills. Payment is usually made by check but can be made by wire transfer or in cash.
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