Scrap Yards & Hedging

𝗦𝗰𝗿𝗮𝗽 𝗬𝗮𝗿𝗱𝘀 & 𝗛𝗲𝗱𝗴𝗶𝗻𝗴: 𝗔𝗻 𝗨𝗻𝗱𝗲𝗿𝗿𝗮𝘁𝗲𝗱 𝗢𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝘆

I've worked with scrap yards from the most basic setups (yes, even a pitbull on a chain as security!) to multi-country processing powerhouses.

One pattern stands out: 𝗺𝗮𝗻𝘆 𝘀𝗰𝗿𝗮𝗽 𝘁𝗿𝗮𝗱𝗲𝗿𝘀 𝗮𝗿𝗲𝗻’𝘁 𝗵𝗲𝗱𝗴𝗶𝗻𝗴 𝘁𝗵𝗲𝗶𝗿 𝗽𝗿𝗶𝗰𝗲 𝗿𝗶𝘀𝗸.

Now, to be fair some are, and doing it well. But most? Not yet. I've seen yards hold metal for 6+ months hoping prices recover. That’s a stressful gamble, especially when 𝗵𝗲𝗱𝗴𝗶𝗻𝗴 𝗹𝗲𝘁𝘀 𝘆𝗼𝘂 𝗹𝗼𝗰𝗸 𝗶𝗻 𝗺𝗮𝗿𝗴𝗶𝗻 𝗮𝗻𝗱 𝘀𝗹𝗲𝗲𝗽 𝗯𝗲𝘁𝘁𝗲𝗿 𝗮𝘁 𝗻𝗶𝗴𝗵𝘁.

So why don’t more scrap traders hedge?
▪️ Lack of staff to manage futures
▪️ Fear of missing out on a higher price
▪️ Belief that purchase/sale offset each other
▪️ Feeling their volumes are too small

Whatever the reason, this powerful tool is being underused.

As recycling becomes central to the green transition and countries scramble to secure critical metals, scrap will become a 𝘷𝘦𝘳𝘺 hot commodity. 𝗜𝗳 𝘆𝗼𝘂’𝗿𝗲 𝗻𝗼𝘁 𝗵𝗲𝗱𝗴𝗶𝗻𝗴 𝘆𝗲𝘁, 𝗻𝗼𝘄’𝘀 𝘁𝗵𝗲 𝘁𝗶𝗺𝗲 𝘁𝗼 𝗴𝗲𝘁 𝗿𝗲𝗮𝗱𝘆.

And here’s the good news, CAT 1 LME brokers are letting smaller traders trade broken lots as they try to capture this increasingly important sector of the market. You aren't bound by the rigid structure of lot sizes on the exchange.

If you want to reduce your exposure to price swings, or you're curious about hedging but don’t know where to start, send me an email: samuel.basi@perfectlyhedged.com

No pressure. No pushy sales. Just help.

And if you're ready to start hedging, I can steer you to the best brokers - ones that aren't going to gouge your eyes out on prices and genuinely want you to succeed.