Scrap metal basics and how grades are described

What scrap is and why it is traded

Scrap is metal that has finished its first life and goes back into production. It comes from two main sources. Old scrap, also called post-consumer scrap, comes from end-of-life products such as cars, appliances, buildings and cables. New scrap, or industrial scrap, is offcuts and rejects from factories. Steel mills, foundries, smelters and refiners buy scrap because it is usually cheaper and less energy-intensive to remelt than to make metal from ore.

Ferrous and non-ferrous

How grades are described

A grade name is shorthand for a specification: which material, what form and size, and what limits on contamination. Several systems are in use. One widely used reference is a specifications circular published by an industry association in the United States, with named grades for many metals. Europe has its own steel scrap list and national standards, and several Asian countries use their own grading. Because the same word can mean different things, state the specification you buy to, for example by naming the document and the grade code, instead of only the nickname.

• Material and alloy, for example copper wire, aluminium extrusion or stainless 304-type.
• Form and size: bales, bundles, shredded, cut, briquettes, turnings, ingots.
• Maximum contamination: oil, plastic, paint, rubber, other metals, moisture.
• Recovery or metal content, where the price depends on it.

What changes the price

• The metal content or recoverable yield. Insulated wire, for instance, is worth less than bare bright wire because part of the weight is plastic.
• Contamination and moisture, which are normally deducted from the weight or the price.
• Size and density: shredded or baled material is easier to load and melt.
• Location and shipping cost, because scrap is heavy and cheap relative to freight.
• The price of the related metal on the day: scrap is typically priced as a percentage or a discount against a reference.

Evidence before price talk

Serious sellers can show recent photos of the actual material, not catalogue pictures. Ask for a photo with a note showing today's date, a short video of the stock or the loaded container, and the weight of a few bales. Ask for the location of the yard and who owns it. For a first deal, ask whether the sample or the whole lot can be checked on site by an independent company.

Inspection and weighing

An independent inspector can weigh the cargo on a certified weighbridge, check the grade against the specification, count containers and bales, and seal containers after loading. For metals that are valuable per ton, ask for photographs while containers are being filled, because a half-empty or mixed container is the usual problem. Radiation screening is common at ports and at many yards, and the contract may require a clearance certificate.

Packing and shipping

Non-ferrous scrap usually ships in containers, bagged or baled. Ferrous scrap often ships in bulk on a vessel, so port access and loading equipment matter. Check export rules: some countries limit or tax scrap exports, and some importers require a licence or a pre-shipment inspection certificate. Ask a forwarder or a customs broker early, because paperwork for waste and scrap can differ from ordinary goods.

Paying safely

Avoid paying the full value before the cargo has been checked. Common structures are a documentary letter of credit, or a split where part is paid against the inspection result and the rest against copies of shipping documents. Choose the structure that both sides and both banks can really operate, and write it into the contract.

Start small, then repeat

Most good scrap relationships begin with one container and grow. Record every agreement in writing, compare the weight, grade and paperwork on delivery against the order, and raise volume after two clean shipments. Tonport lists scrap products with indicative customs codes, and the Metals channel in the Deal Room is a place to ask about grades and yards.

Frequently asked questions

What does a grade name like HMS mean?

It is shorthand for heavy melting steel, a category of thicker steel scrap. Different markets attach different size and contamination limits, so refer to a written specification.

Why is scrap priced below the metal price?

Scrap needs to be sorted, processed and melted, and it contains some impurities and losses. Buyers pay a discount that reflects grade, yield and cost of processing.

Is scrap always shipped in containers?

No. High-value non-ferrous scrap usually goes in containers, while large ferrous volumes often ship in bulk on vessels.

How do I reduce risk on a first scrap deal?

Buy a small lot, use an independent inspector at loading, ask for dated photographs and pay in stages tied to inspection and documents.