In the old days, steel was made in integrated mills, but today, vast amounts of steel are produced in mini mills, which develop over 90 percent of their raw material from recycled scrap steel.
Staying on top of your game and keeping a competitive edge is key in the ever-changing, aggressive steel market, and is imperative to your bottom line.
One website to keep up with daily scrap pricing updates is AmericanMetalMarket.com (AMM.com). You can also see which countries are buying scrap metal, and how much they are paying.
Since the cost of scrap is directly related to the cost of the product from mini mills, steel mills set a benchmark of $162 per ton for scrap. So, if prices go above $162, a scrap surcharge goes into effect. The scrap surcharge has been more than 14 cents per pound at times during 2012.
Also, pay special attention to "shredded auto scrap" in the Chicago area as this is the category used for benchmarking purposes.
So, what causes pricing to go up or down?
The single biggest impact to scrap costs, typically, is the amount of scrap that large oversea users are buying. Large oversea users such as China, Turkey or India, can have a major impact to scrap prices.
They buy in large enough amounts, that one huge buy can cause a shortage in domestic scrap. Within days of a major transaction the scrap surcharge can go up dramatically. If those large users are not buying, then there can be a dramatic fall in pricing as well.