Just how do scrap yards make money? After all, they seem to deal with nothing but waste and unwanted materials. How could that possibly be profitable?
As it turns out, there are a number of ways scrap yards can make money, from recycling metal to selling parts and components to various groups including product manufacturers and even homeowners.
If you own a scrap yard and are wondering how to make it more profitable, or if you’re planning to get into or expand into this business, you will need to know precisely who your target customers are/will be and accordingly source the scrap that you can actually sell to them. You will also need to be clear if you will need to process the scrap before selling it as this will, no doubt, affect your profitability.
In this article, we’ll explore the most common strategies used by successful scrap yards. By understanding how these businesses operate, you can gain insights into how to make your own scrap yard more profitable.
Let’s get started!
How Do Scrap Yards Make Money?
Here are 5 of the most common and profitable strategies scrap yards use to make money:
- Recycling
- Selling to manufacturers
- Selling to trade experts – electricians, plumbers, etc.
- Selling to homeowners
- Selling online
- Selling to metal mills/factories
Let’s look at each of these in some detail.
1. Recycling
Scrap yards can recycle the metal scrap that they get and sell it back to manufacturers or on the open market. This is a great way to make money as it cuts down on the amount of waste that needs to be disposed of. It also helps to reduce the environmental impact of manufacturing processes.
For example, aluminum cans can be recycled and the aluminum reused. This is usually accomplished by crushing the cans and then melting the aluminum down. Recycled aluminum can be used to make new products such as bicycle frames, car parts, kitchen utensils, and of course, more aluminum cans.
Similarly, scrap steel can be recycled and reused. Many steel mills only used steel scrap as their raw material. The steel is melted down and reformed into new products such as rebar, I-beams, and pipes.
Most metal scrap can be classified into 3 types: Ferrous, non-ferrous and electronic. As the names imply, ferrous scrap includes metals that contain iron or its alloys. Non-ferrous scrap has metals that don’t have high iron content, such as aluminum and copper. Electronic scrap is anything that contains circuitry, such as computers and cell phones.
Classifying the scrap metal correctly is important as it will determine how much the scrap yard can sell it for.
2. Selling to Manufacturers
Manufacturing companies often source scrap metal from scrap yards as a way to reduce their production costs. The scrap metal can be used in the manufacturing process instead of having to use new, virgin metal.
Can manufacturers will often buy aluminum scrap from scrap yards as it’s a cheaper way to get the aluminum they need. Companies making aluminum foils can do the same.
Scrap yards can negotiate standing contracts with manufacturers to sell them a certain amount of metal scrap each month. This can provide a steady income stream for the scrap yard and can help the manufacturer better budget its production costs. The manufacturer also benefits from a regular flow of raw material and reduced inventory and storage costs.
The contracts can specify the type and quantity of metal to be delivered. The scrap yard can then work to collect the required amount of those specific metals.
3. Selling to Trade Experts
Another common way that scrap yards make money is by selling to trade experts such as electricians, plumbers, and mechanics. These professionals often need metal scrap for their projects.
For example, an electrician might need copper wire or brass fittings for a job. A plumber might need steel pipes or iron fittings. A mechanic might need aluminum or magnesium alloy for car parts.
Scrap yards can sell metal scrap directly to these trade experts or they can sell it through wholesalers who specialize in selling to these professionals.
4. Selling to Homeowners
Homeowners who are renovating their homes or doing some DIY projects often need metal scrap. They might need copper pipes, aluminum siding, or steel beams.
Scrap yards can sell metal scrap directly to homeowners or they can sell it through wholesalers who specialize in selling to the general public.
For instance, someone renovating their bathroom might need copper pipes. They could go to a scrap yard and buy the pipes they need. Or they could go to a hardware store and buy brand new, unused copper pipes.
The advantage of buying from a scrap yard is that it’s usually cheaper. The disadvantage is that the metal might not be in as good condition as what you’d find in a hardware store.
5. Selling Online
Scrap yards can also sell metal scrap online through websites such as eBay or specialized sites like The Metal Trader or the Scrap Marketplace. This is a great way to reach a wider audience and increase sales.
When selling online, it’s important to describe the metal scrap accurately. This includes specifying the type of metal, the condition of the metal, and how much is available.
It’s also important to take good photos so that potential buyers can see what they’re buying.
Selling through online auction sites such as eBay can be a great way to get rid of metal scrap that’s difficult to sell through other channels.
6. Selling to Metal Mills/Factories
Metal mills and factories often use scrap metal as their raw material. For instance, steel mills that make use of electric arc furnaces use scrap steel as their primary raw material. Scrap steel can be sourced from old cars, appliances, metal beams from demolished buildings, and so on.
Using scrap metal and recycling it to make metal products is also good for the environment. According to the Worldsteel Association, every ton of steel scrap used in steel production avoids 1.5 tons of carbon dioxide emissions as compared to when steel is manufactured from scratch using iron ore.
Selling to metal mills and factories is a great way for scrap yards to get rid of their metal scrap. And it’s also a great way for these mills and factories to get the raw material they need at much cheaper costs than getting them from mining companies.
Summary
So how do scrap yards make money?
While running a scrap yard business isn’t exactly the fast way to fame and riches, there are multiple ways in which a scrap yard can actually make good money.
The most common of these is to recycle and resell the scrap that it has. Metal is the classic material that can be recycled. Glass too can be recycled. Recycling is not just good for the environment, it’s also good a great way to reduce costs. This is why manufacturing companies often source raw materials, parts and components from scrap yards.
Trade experts like plumbers and electricians will often need parts that they can find at scrap yards. The same goes for homeowners looking to renovate a part of their house. If they can get a good quality part at a scrap yard, they would rather prefer it to an expensive new product at a hardware store.
Scrap yards should also turn to online marketplaces like eBay, The Metal Trader or the Scrap Marketplace. And finally, metal mills and factories are always on the lookout for sources of high-quality metal scrap that they can melt down and build into new metal products.
So, there you have it – the most common ways in which a scrap yard can make money. We hope that you are able to use some or all of these methods to make money for your scrap yard.
