Scrap Metal Is Worth More Than You May Know
Are you being paid for the correct weight?
How does your organization audit your scrap weights?
Every company should think carefully about these important
questions. Scrap is worth real money. Real money
means dollars, not cents. In addition, by dollars we mean
potentially thousands of dollars!
Several years ago, the United States Federal Government
began investigating the business practices of several scrap
metal dealers. In 2004, two Cleveland area companies were
accused..…and indicted. The Justice Department levied fines
of $10 million for each company. Furthermore, executives
from both companies were fined and given jail time. In addition,
in 2004, a Michigan company pled guilty to defrauding
suppliers. That company was ordered to pay criminal fines
as well as pay restitution to its victims.
One of the main issues being investigated is the
practice of short weighing. Short weighing occurs when
misrepresented weights are used to pay the supplier/
customer. Short weighing typically happens two ways.
The first method is very straightforward. The scrap dealer,
for example, picks up a scrap container from a customer
that does not weigh the material. It is short weighing if
the actual weight is 22,000 lbs and the customer only gets paid for 18,000 lbs. The second method is a little
more complex, as was the case of the Michigan company:
this situation involved the reprinting of weight
tickets. The scrap dealer’s scale weighed accurately;
however, they were reprinting weight tickets with lower
weights and sending those to their customers. In both
instances, the supplier/customer received documentation
with weights; unfortunately, those weights were
To keep legitimate competition at bay, scrap dealers
that short weigh will falsely “pay” a price back to the supplier/
customer that is at or signifi cantly above the steel mill
market price. That situation should raise a red fl ag right
away. How could a dealer that is reselling the material to a
mill pay their customer a higher price than they could sell
it for? Daily publications such as “American Metal Market”
and “Iron Age” help keep manufacturers informed of what
their scrap is actually worth.
Here is an example of how much short weighing could
cost a business:
#1 Steel Busheling @ $220/gross ton
25,000 lbs = $2,455
20,000 lbs = $1,964
18,000 lbs = $1,768
Getting paid on 20,000 vs. 25,000
(2,455 - 1,964)
Being Short weighed 5,000 lbs
@ $491 x 52 pick-ups = $25,532
Being Short weighed 5,000 lbs
@ $491 x 104 pick-ups = $51,064
The more volume you have the greater your risk is if you
do not accurately audit your scrap.
As you can see, these are real dollars. This kind of cash
fl ow can help hire a new employee, shorten your payable
times, or be used towards a company party. The fact is, it
is your money. You paid for the material when it came in
your door, and you still own it when it leaves your door as
scrap. Not getting the full value is cheating yourself and
The following are some warning signs and questions to
consider when selling scrap:
• Too much consistency on amount of scrap being paid
for when several variables make consistency highly
unlikely; i.e. fluctuation in volume of parts produced,
different gauge material being used, wide range in
percentage of scrap per part between different part
• Scrap pricing remaining level while the market is continually
• Pricing is considerably higher than any other competitor
and at times higher than what is posted in the market.
Many purchasing agents and even business owners
are fooled into believing they are getting the best price
when in fact it could be the opposite if their scrap isnot completely accounted for.
• Attempts to lure business owners and employees with
offers of cash and/or favors.
• Front offi ce not really knowing what or even how many
loads of scrap are picked up.
• Back operations not knowing if every load and every
pound of material is accounted for when/if it is
• Is there an itemized statement including date of pick up, type of material, weight of material, price per unit weight? More importantly, do you have matching
• Is your company receiving fair market value and payment
in full? Put another way, let’s say your company
produced 800,000 lbs. of scrap this year. Did your company
receive fair market pricing, based on market resources
available to you, for the entire 800,000 lbs?
• Does your company have its own scrap auditing process?
• Do you know if your scrap is graded correctly?
• Does your company use scrap market publications to establish whether it is receiving fair market value?
Some things to look out for:
• It happens in the manufacturing industry that cash is
accepted as payment for scrap metal; however, cash
transactions could mean big trouble if cash receipts are
not claimed as income.
• Consider testing your scale if your scrap vendor provides
it, and have it calibrated by someone of your choosing
and NOT the vendor.
• Look out for scale manipulation such as setting a container
off center, over the edge, or not fully on the
scale. On board truck scales can also be manipulated
by entering an infl ated tare weight.
• Some scrap vendors have been caught stealing weight
from companies by putting infl ated tare weights on
containers ranging from drums, boxes, dump hoppers,
luggers, roll offs, trailers, etc. Understand that 20 loads
from dump hoppers may be used when filling a lugger or a roll off.