The Myth of Trade Secrets in The Scrap Industry

During my three years in the scrap industry, I have often heard the term “trade secrets” tossed around. Every scrap dealer I have ever spoken with has always been understandably tight-lipped about how they process, where they sell, and how much they get for the material. This is an understandable practice, as they attempt to protect themselves from the competition. However, my question is; does is it really matter?

Everything in the scrap industry seems to be a product of limitation. The industry itself is only made up of around 8-10,000 unique companies in the US and Canada. The industry is so niche that every year, 60-70% of its membership actually gets together in one place for an annual conference. Here dealers, brokers, and consumers from across the industry schmooze, booze, and meet with current and new business partners. Supplementing this, are local and regional chapter events throughout the year. I’m no math whiz but statistically speaking, shouldn’t everyone meet just about everybody at some point?

Only several factors actually determine the ultimate value of a scrap item, including: raw commodity price, consumer demand, freight cost, labor cost, volume available, and recovery percentage. Aside from the volume, any one supplier has available to sell, most of these variables are pretty standardized for each item. Further, simplifying things is the fact that there are only so many consumers available to purchase any one specific item. Suppliers are also often limited to a select few consumers within a specific geographic region due to the burden of freight cost. The emergence of the internet has also drastically changed things.

Historically, only the industry’s big dogs had the resources to find the consumers necessary to maximize their sale prices. Now, just about any scrap dealer with a computer can easily find a new consumer by running a Google search and picking up a phone. Most of the time the process is fairly straightforward: Just dial the main number, ask for whomever is in charge of scrap purchasing, speak to buyer, exchange pleasantries, receive specs, receive initial broad price range or low ball price, send pictures of material, continue dialogue, and haggle price until agreement. It is very rare to find someone that has a secret “specialty” home for an item, but how much more could they possibly be getting for it? It’s doubtful that it’s a significant difference. However, it could be enough to gain a slight edge over the competition, but who cares? This is a statistical anomaly that only applies to a few items and few companies.

So in conclusion, if everybody knows everybody and there is no magic formula to make scrap worth more; what trade secrets are people really protecting? If they are revealed, will it really impact or change things that much?

Categories: Industry