Tuesday, June 2, 2015

Scrap Metal Business Model

This past month I actually saw the future of the scrap metal business model. The business (scrap yards that is) has become so commoditized that it can no longer operate on the traditional model of buy low, sell high. Or, for example, have a $0.10 gross operating margin. Adios. Nada. Over.

The new model is % of profit. Meaning you make 1% - 3% net. You spend $40,000 on a container and make 2% profit. So the more you spend the more you make.

Scrap yards and brokers are now treating container loads of scrap metal as physical futures contracts. 

I will elaborate on this model in the next post.

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