Canadian recyclers process over 16 million tonnes of scrap metal each year, making it the largest sector within the recycling market. But dealing in the scrap metal market isn’t always easy because of the commodity’s fluctuating prices. Values can change from day to day, so scrap yard managers keep an eye on market prices at all times to determine how much their metal is worth.
Here are a few reasons why scrap metal prices change so much and what Richmond Steel Recycling thinks about when trading scrap metal in the market.
Supply and Demand
Like most commodities, supply and demand play a significant role in the price of scrap metal in Canada. The more people who want scrap metal, the more prices go up, depending on available supply. If the demand for scrap metal decreases, so does its value. For example, if there is an economic recession, construction is likely to be lower, which consequently brings down the demand and price of scrap metal.
Some countries, such as China and India, have been known to stockpile scrap metal before releasing it to the market. This can affect prices if the new supply on the market exceeds the demand of buyers. If a country already has a large inventory of metal, they can also drop their price and pay less for new supplies.
Situated on the banks of the Fraser River on Canada’s West Coast, Richmond Steel Recycling is perfectly placed to transport its scrap metal to countries across the Pacific Rim. Locations far away from international shipping ports, which require long road travel to bring it to market, can also drive down the price of scrap metal.
Richmond Steel Recycling’s main scrap yard location also lends itself to overseas competition export and pricing.
Richmond Steel Recycling exports most of its scrap metal to the US so a strong US dollar benefits the company. A weak American dollar means foreign buyers will see American goods as inexpensive and exports tend to rise, which drives down the price of scrap metal. To protect the organization from currency fluctuation Richmond Steel Recycling employs a hedging strategy.
While there are no scrap metal tariffs in place against Canada, embargoes on trade partners alters the market significantly. China and the US both have scrap metal tariffs imposed on each other as part of their ongoing trade war. Lower trade between two leading world economies can reduce worldwide metal consumption, reducing scrap metal’s value. Both countries are key trading partners for Canada’s scrap metal industry.
The scrap metal industry relies on oil for transportation and to run heavy machinery used to load and process it. Therefore, the price of oil is closely linked to the value of scrap metal. High oil prices will likely lead to lower scrap metal prices as overhead cost for scrap yards increase.
However, when oil prices fall, demand for scrap metal may rise as consumers feel like they have more money in their pocket and buy more products that use scrap metal.
At Richmond Steel Recycling, we offer competitive prices for all types of scrap metal. If you are planning to sell your scrap metal, get a quote today.