Selling metal scrap can seem relatively straightforward on paper: collect it, hand it to a scrap dealer, get paid.
But, if you want to optimize revenue, the devil is in the data. Without access to accurate performance metrics, there's a good chance you'll leave money on the table. Or, in the worst case scenario, lose out financially.
In the course of our work, we've found that most metal scrap sellers face similar data challenges, all of which are fixable.
Here's a deep dive into the five key issues we come across most often, and how Metaloop can help you resolve them.
Can you check which types of metal scrap you produce, how much, and the prices you're achieving compared to the market at a glance?
Most industrial manufacturers can't, for one simple reason. By definition, scrap is a by-product of their operations, and not the core product. As a result, they typically lack the resources and specialized know-how to put efficient and effective (read: profitable) scrap management and recycling processes in place.
Poor visibility is especially problematic for manufacturers with multiple production sites, particularly if those production sites are located in different markets (more on this in the next section).
That said, it's a significant challenge for smaller manufacturers too, mainly because creating a trusted source of structured data to inform how scrap is stored, marketed, and sold tends to be low on their already overstretched procurement teams' lists of priorities.
The end result is a vicious cycle.
Lack of resources and know-how and low-priority status mean many manufacturers sell their scrap for less than it's worth or end up paying for it to be taken off their hands. In turn, this reinforces the idea it's not worth investing too much time and effort on it.
But, in reality, given access to the right data, metal scrap could generate significant additional revenue.
The two most important scrap metal metrics to keep track of, says Metaloop's Head of Growth Patrick Gallit, are volume and quality.
"Scrap metal buyers, particularly those at the end of the supply chain — steel mills, foundries, and smelters — want two things above all else," he explains. "A regular, reliable supply, of sufficient quality to meet their specifications. So, knowing how much you produce and how much processing it might require boosts your leverage in negotiations."
But, the more granular you can get, the better-placed you'll be to maximize your metal scrap revenue.
"Size. Type. Grade. It all matters in a negotiation, because price can vary widely even when you're dealing with the same material," says Patrick Gallit. "Copper turnings will likely fetch a different price to stampings, for instance."
Poor visibility is an even bigger challenge if your operations are spread across different locations.
"Once you have robust data management processes in place, it's relatively easy to maintain them on a single production site, because all the metrics you need to track and the people in charge of tracking them are in the same location," says Patrick Gallit.
"That's not the case when you have production sites in multiple locations, all of which may have different operational processes and produce metal scrap of varying type and quality."
One of our clients, a Belgian packaging manufacturer, struggled to create a single, unified source of structured data for this reason. Their production sites were all using different strategies, processes, and tools, and geography made co-ordination tricky.
As with a single production site, not having end-to-end visibility directly affects how much revenue you can expect to make from metal scrap, because it impacts your leverage.
"Larger volumes fetch better prices, because they unlock economies of scale," explains Patrick Gallit. "When you have data silos, you can't monitor and forecast overall quantities with accuracy, so you're forced to market the output from different production sites separately, which weakens your negotiating position."
Say you have four sites. Site one produces 100 tons of scrap a month. Sites two and three produce 240 tons a month. Site four produces 400 tons a month.
Without visibility into these volumes each site will have to sell its scrap separately. Once sorted by type and quality, each individual site's volumes may not be large enough to attract the highest-paying buyers.
By contrast, if you had visibility into the volume and quality of scrap at all four sites, you could aggregate similar materials from all four sites, which would give you much more leverage.
While many metal scrap dealers link their prices to an official index, such as the London Metal Exchange and BDSV (the Federal Association of German Steel Recycling and Disposal Companies), their pricing methodologies can still be somewhat opaque.
In part, this is due to how the market works, says Patrick Gallit. "Dealers are often one link in a lengthy chain of middlemen. As such, their profit-margins are razor-thin, and their approach to pricing has to take this into account."
The absence of widely-accepted industry standards adds to the opacity. More often than not, when you take all the different variables into account — where your dealer sits in the supply chain, how they calculate volume, how the market in which the dealer operates works, and other factors — it's impossible to verify claims that what you're being offered is "the best price."
Metaloop takes a two-fold approach to pricing data.
We benchmark the prices buyers are offering with the relevant indexes to see how they compare.
At the same time, we also benchmark the prices that sellers of scrap metal of similar volume and quality are achieving, and in which markets. The upshot is that our pricing doesn't depend on the client's location. We can pinpoint in which markets the type of scrap they produce is in highest demand.
Patrick Gallit
Not having access to complete and accurate data makes the admin associated with selling metal scrap harder in two key ways.
First, it can lead to improper storage, which affects how much you can get for your metal scrap (or whether you can even sell it at all).
At a minimum, you should keep the different metal elements separate. But, ideally you should also separate scrap by alloy and usually the form of the material, to minimize the risk of reactions that would lower its quality or render it unusable.
Without access to data you can use to monitor your output, this evaluation has to be carried out manually, creating the risk of human error.
Second, compliance with reporting requirements, such as those under the End of Waste Regulations on Scrap Iron, Steel, and Aluminum in the EU, or federal, state, and local scrap metal management ordinances in the US, is much more challenging.
"Many manufacturers have one person whose full-time job ends up being chasing down different production departments to piece together the data required for audits and reporting before the end of December," observes Patrick Gallit.
This approach has significant risks — errors and missed deadlines, just to name two. But, more importantly, it's not an efficient use of resources. Audits and reporting are much smoother processes when you have the data you need at your fingertips.
Structured data is critical to how we approach selling metal scrap at Metaloop.
"The first thing we do when we onboard a new metal scrap seller," says Patrick Gallit, "Is take all their data, no matter how unstructured it is, clean it up, and organize it so that they have full visibility into what's going on on their production sites."
Having access to this data enables us to carry out a thorough analysis of the customers current processes, and identify opportunities for optimization.
"We'll look at things like how scrap is sorted and stored, and whether these processes can be improved," explains Patrick Gallit. "Or whether there's a way to streamline operations so that production sites can aggregate higher volumes of scrap at lower cost."
More to the point, though, our wider data set and global network of local partners means you'll no longer be tied to a specific location. We'll collect your scrap, aggregate it with that of similar producers, and sell it in the markets where demand is highest.
And, because we have contracts with large end-buyers who pay a premium for the peace of mind of a regular supply of high-quality scrap, you're always guaranteed the best possible price.
For one of our clients, switching to Metaloop resulted in an 8% increase in revenue over what they were getting from their long-term scrap dealer, equivalent to €48,000 extra a year, but we have also examples where in which we were able to increase annual revenues close to half a million Euro per year - this is obviously very dependent on scrap volumes.
By how much could you increase your scrap metal revenue, if you worked with us too?
Struggling to organize your metal scrap data?