The movement of red metal scrap comes down to a single word: quality. That was the consensus among the panelists who took part in the Scrap Expo session Commodity Focus: Red Metals.
Daniel Poris, vice president of nonferrous at GLE Scrap Metal, with locations in Florida and Michigan, moderated the red metals discussion, which included David Klein, senior vice president of nonferrous marketing at Alter Trading Corp. in St. Louis, and Michael Diehl, a senior vice president who is based in California for New York-based Coremet Trading Inc.
“When things slow down, the guy who makes the best package is always marketable,” Diehl said.
He added, “There has been a rush to quality over the last eight years. Consumers want cleaner scrap for the sake of their processes.”
Klein also emphasized the need for quality, saying, “You need to know that the material is what you say it is.”
The way that scrap is packaged also could affect the price a wholesale yard or broker offers. While Klein said Alter is not turning away scrap because of the softness found in the market as of mid-September, he added that the company might offer a lower price for some red metal packages, particularly if the bales are falling apart.
Poris said the “slightly pregnant items” come with opportunity costs that yards need to consider when pricing these materials.
“Back in 2006, anything metallic was sellable,” Diehl said, referring to when China was a frequent buyer of lower quality grades of red metal scrap. However, that is not the case today.
When it comes to managing the risk associated with volatile pricing for red metals, Klein said Alter’s approach involves knowing its inventory and selling as soon as possible. “There is money to be made by keeping material turning and sold,” he added. To do this, a yard must know what it has and sell it for what it is to the right consumer.
All the panelists noted the variations that exist among No. 2 copper packages, for instance, with Klein saying, “For the most part, we don’t make multiple grades of No. 2 copper. We might have a lower grade one that goes to refiner.” However, he added that on the brokerage side, he needs to know what packages the yards are making so he can sell it correctly.
Diehl said value is found in knowing what is in the product and who wants it.
For instance, he said, the birch/cliff grade that China buys can be better described as a “slightly ugly berry/candy.” The key is marketing the material so that it yields the most profit for the seller.
Klein said selling into China is “not worth the hassle unless your buyer really understands what you’re shipping.” He added, “The Customs official is really the customer that matters” when it comes to selling red metals into China.
“I find it incredible people are not representing their materials correctly,” Poris said. “To maximize value, you need to know what you’re selling.”
When deciding how much effort to put into sorting red metal scrap, Klein said the calculation is different for all yards based on the number of employees and the volume of material they are pushing through. “You need to know how much it costs you to process that material.” He added, “The trouble and cost associated with shipping direct [to a consumer] doesn’t make sense for some yards.”
Scrap processors need to understand their costs and where their money is best spent, Klein said. “What is the cost of money? If you’re not thinking about that, you might have a blind spot.”
Recycling Today hosted its inaugural Scrap Expo on Sept. 13-14 in Louisville, Kentucky. In addition to indoor and outdoor exhibit areas with live equipment demonstrations, the event included educational programming on equipment maintenance and scrap metals.
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