Scrap Metal Prices
Scrap Metal Prices 137
FERROUS SCRAP METAL PRICES
Scrap metal prices depend on the scrap class of the metal, whether the scrap is
delivered to a broker or directly to a mill, and the city in which the scrap is
traded.
1
The more than 100 classes of ferrous scrap depend on the size and
thickness of the steel pieces in the lot and the source of the steel (e.g., automo-
biles, railroad equipment, steel cans). For our analysis we selected heavy melt-
ing No. 2 steel 5 feet × 18 inches or under.
2
No matter the grade of steel, the
material must be free of dirt, nonferrous metals, foreign material of any kind,
and excessive rust and corrosion. The requirement excluding foreign material
does not apply to the accidental inclusion of negligible amounts of foreign ma-
terial where the amount is unavoidable in normal preparation of the alloy. How
the steel scrap is delivered has an enormous impact on price. If it is delivered to
the steel mill directly on railroad cars in many ton lots rather than to the yard of
a broker or exporter it will bring a higher price. The reason for this difference is
that the broker or exporter has to incur further transportation costs and must
have an allowance profit built into its prices for the raw scrap material. Price
will also depend on the city in which the scrap is traded—i.e., the price is di-
rectly related to the trading city’s proximity to the mills in which the scrap will
be processed. In Pittsburgh, Philadelphia, and Chicago, mills are relatively
close. Scrap delivered freight on board (FOB) to these cities can command a far
higher price than can scrap delivered to San Francisco, Seattle, or Houston,
where a broker or exporter is directly available but the mills are much further
away.
Figure D.3 illustrates this relationship, plotting the average monthly price for
heavy melting No. 2 steel scrap for the past five years for the six cities just men-
tioned. The very pronounced difference between the East Coast and West
Coast cities is evident. Also evident are the volatility of the price and the price’s
general trend of decline since 1995. The average monthly price in October 2000
in Houston, Pittsburgh, and Chicago was about $80 to $90, whereas in Philadel-
phia it was $60 and on the West Coast it was about $20.
3
All of these prices are
in U.S. dollars per long ton FOB mill or broker yard. If a shipbreaker delivers
the scrap in the form of modules to a middleman so that it can be further
reduced in size for scrap mill processing, the prices decline by roughly half.
To establish an estimate of the scrap steel price for further analysis, we selected
prices at cities representative of those that would be likely to handle the ship-
breaking of the Navy and MARAD ships: San Francisco, Houston, and Philadel-
______________
1
Scrap Price Bulletin, Cahners Publishing, 2000.
2
See Scrap Recycling Institute, Scrap Specifications Circular, 1998.
3
Ibid.
Page 3/7
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