How Scrap Metal Prices Are Actually Set
The reference price you see online and the cash a yard offers are never quite the same number — here's the whole chain of why.
Almost everyone selling scrap for the first time asks some version of the same question: why does the price they saw online not match what the yard just offered them in cash? Neither number is wrong — they're measuring different points in the same chain. Here's how that chain actually works.
It starts with a global benchmark
Most common metals trade against a global commodity benchmark the way oil trades against Brent or WTI — copper, aluminium, and several other base metals reference the London Metal Exchange (LME); some markets look to COMEX and other regional exchanges. These benchmarks move constantly on global industrial demand, currency shifts, and supply disruptions, and everyone downstream — mills, processors, yards — prices off that same moving number.
Ferrous scrap (steel, iron) doesn't trade on a single global exchange the same way, but regional index prices published by industry trackers serve a similar function — a shared reference point the whole trade quotes against.
Grade discounts the benchmark doesn't show
The benchmark price assumes a specific, clean, standard-grade material. Real scrap almost never arrives that way, and every deviation gets priced as a discount off the benchmark:
- •Contamination — mixed metals, attached plastic or rubber, paint and coatings all reduce the recoverable metal per kilogram.
- •Alloy uncertainty — if a buyer can't verify the exact alloy, they price for the worst reasonable case, not the best.
- •Form and sorting — baled, shredded, or loose material processes differently, and unsorted mixed lots get priced at the lowest-value component inside them.
- •Volume — very small lots often carry a bigger relative discount, since handling and testing cost roughly the same regardless of quantity.
Why the yard's number sits below the reference
A local yard isn't the end buyer — they're a middle step who has to resell your material further up the chain, often after further sorting or processing. Their cash offer has to leave room for their own margin, transport to the next buyer, and whatever additional handling your lot needs before it meets that buyer's specification. That gap is exactly what a direct online listing can close, since a buyer bidding on your listing is often further up that same chain than the local yard is.
What this means practically
Use a live reference price as a starting point for negotiation, not a guaranteed number — and remember that clean sorting and accurate grading are the two things you actually control that move your price closer to the benchmark rather than further from it.
Common Questions
Why does a yard offer less than the price I see online?
The online reference price is usually close to a wholesale or export-grade benchmark. A yard's cash offer has to cover their own margin, transport to the next buyer up the chain, and the cost of further sorting or processing your material before they can resell it — so their number sits below the reference, not on top of it.
What sets the benchmark price in the first place?
For most common metals, global commodity exchanges (like the LME for base metals or COMEX for others) publish a trading price that the whole industry references, the same way oil trades off a Brent or WTI benchmark. Regional scrap prices move up and down with that benchmark, adjusted for local supply and demand.
Does grade actually change the price that much?
Yes, often more than people expect. Two lots of what looks like the same metal can differ 15-30% in price purely on grade — contamination, coating, alloy mix, and sorting quality all get priced in separately from the base commodity number.