Protecting your buying margin when scrap prices move

The uncomfortable arithmetic of a scrap yard is that you buy at a price you set today and sell at a price the market sets later. Everything between those two moments is exposure.

Most yards manage that exposure by instinct — an experienced buyer who "knows" what to pay. That works until it doesn't: until the person leaves, or the market moves faster than the board, or volume grows past the point where one person can hold it all in their head.

This is a framework for making it explicit. It contains no price predictions, because nobody can make them reliably.

Know your holding period per material

Your exposure is not one number. It is different for every material, and the driver is how long that material sits in your yard before it ships.

Copper that moves weekly carries a fraction of the price risk of a mixed grade that accumulates for two months before there is a full load. Yet many yards apply the same percentage spread to both.

The first thing to measure is average days-on-hand by material. If your system tracks purchases and shipments against the same material records, this is a report. If it doesn't, it is a project — and that gap is itself worth fixing.

Set the spread from volatility and holding period, not habit

Once you know holding periods, the logic follows:

Material profile	Exposure	Implication for spread
High value, ships weekly	Low duration, high unit value	Tighter spread is defensible; volume matters more
Moderate value, ships monthly	Moderate	Spread should absorb a normal monthly swing
Low value, accumulates for a full load	High duration	Widest spread; you are carrying the risk longest

The common error is inverting this — competing hardest on the low-value grades that sit longest, because they feel less consequential per kilo. They are where the duration risk concentrates.

Change the board on a rule, not a mood

Yards that hold margin well tend to have an explicit rule for when the buying board changes. Something like: reviewed every Monday, and immediately if the reference price moves more than X% intraday.

The rule matters more than its exact parameters, for two reasons. It removes the argument every time someone wants a price change. And it makes the decision reviewable afterwards — you can look back and ask whether the threshold was right, which you cannot do with instinct.

Write it down. Tell the buyers. Post the review date.

Measure realised margin, not intended margin

This is the step almost everyone skips.

Your intended margin is the spread you set. Your realised margin is what you actually made after grading losses, contamination, weight discrepancies, the loads you took at a favour price to keep a good supplier, and the ones a buyer misjudged.

The gap between the two is where the money goes. You can only see it if purchases and sales resolve to the same material records — which means your purchase logging and your inventory have to be one system, not two.

A yard that can produce realised margin per material per month has a management tool. A yard that can only produce revenue and cost has a bank statement.

Watch the concentration you are not pricing

Two exposures rarely show up on the buying board:

Supplier concentration. If one supplier is 30% of a material's intake, your effective price on that material is a negotiation, not a market. Know the number before the conversation.

Grade drift. When a regular supplier's material quality slips gradually, the price stays the same while the realised value falls. Only per-supplier, per-material history catches this — and it catches it months before anyone notices by eye.

What to put in place this quarter

1. Average days-on-hand per material for the last six months.
2. A written rule for when the buying board is reviewed.
3. Realised margin per material for last month, however roughly you can assemble it.
4. Intake share by supplier for your top three materials.

None of these require new software if your records are good. All of them require records that tie purchases, inventory, and sales to the same material — which is precisely what paper tickets and month-end spreadsheets cannot do.

See how SPiS keeps inventory and purchase records in one place.

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