How the Price of Oil Affects Scrap Metal Prices

Are you wondering how scrap metal prices work? Predicting the movements of prices in any industry is complicated, and the same is true of the scrap metal market. However, there is one factor that you can be sure will influence scrap metal prices: the price of oil.

The price of oil affects many industries, including the scrap metal and recycled metals industry. Here are some of the ways it has an impact:

Processing Costs

One obvious way that the price of oil affects scrap metal prices is in processing costs. Processing scrap metal involves the use of heavy machinery that uses gas. So, when the price of oil rises, the processing costs for scrap metal increase, also causing an increase in the cost of scrap metal.

On the contrary, when oil prices drop, the processing costs are also reduced, meaning the price of scrap metal may come down.

Transportation Costs

Scrap metal is transported all around the world. Transportation costs are heavily influenced by the price of oil. So, when the price of oil goes up, transportation costs also go up. This may also affect the price of scrap metal, causing it to rise.

Oil Companies Use Scrap Metal

Oil companies use scrap metal for many projects. When the price of oil drops, oil companies may slow down or halt plans, meaning they decrease the demand for scrap metal. The opposite happens when prices rise. However, you’ll note that there’s still a situation of when oil prices rise, scrap metal prices also increase, and the opposite is also correct.

Broader Market Influences of Oil Prices

When oil prices fall, consumers overall have more money in their pockets. This often results in a rise in consumer purchases of items such as appliances and vehicles, which both use recycled metals. This means there’s a higher demand for scrap metal, causing a rise in price. In addition, people are also likely to get rid of old appliances, which creates a more substantial supply. All of this is positive for the scrap metal industry. However, sometimes instead of selling old devices for scrap, consumers hold onto their metal, waiting for an even better price.

Other Factors that Influence Scrap Metal Costs

While the relationship between oil prices and scrap metal prices may seem pretty straightforward, there are even more factors at play. Exchange rates of currency, the global economy, particularly the economies of developing countries where scrap metal plays a big role in creating infrastructure, politics, and other factors also influence the price of scrap metal.

Nonferrous Metals

Especially nonferrous metals like copper, aluminum, and others are also influenced by stock markets, trading and the worldwide markets. This is just another complicating factor to add to the mix, showing that a very complicated process involving numerous factors determines scrap metal prices.

For these reasons, it’s quite difficult to predict future prices of scrap metal. Even though there are definite patterns that make it seem easy to predict an outcome for scrap metal prices based on oil prices, there are too many other factors at play that can also have an influence. Oil is a powerful commodity that has a substantial impact on many industries and scrap metal is no exception. It’s easy to describe the ties between the prices of these two goods. However, it’s not always as predictable as it may seem.

Are you looking for a reliable scrap supplier or purchaser? Bring your scrap metal to Ecology for the best prices and conscientious processing methods. Call ahead of time and we’ll be happy to share the going rates for ferrous and nonferrous scrap metals. We look forward to serving you soon.