Scrap is the feedstock behind more than half of U.S. steel output, priced on the CME, and its spread against finished steel decides an EAF mill’s margin. InHedge structures and monitors scrap hedges for mills, recyclers, and industrial buyers that want to manage their exposure more closely. Talk to the InHedge hedging desk →
Scrap, or recycled metal, plays a pivotal role in the global economy by converting industrial waste and discarded materials into reusable raw resources. This process not only reduces the need for new resource extraction but also minimizes the environmental impact associated with mining and primary production. Metals like steel, aluminum, and copper are recycled to manufacture products ranging from technological components to infrastructure materials.
Types of scrap and its valuation
Scrap is categorized into two major types based on its composition and application:
- Ferrous scrap: Predominantly composed of iron and steel, it is widely used in the production of recycled steel through electric arc furnaces, which are more energy-efficient and environmentally friendly.
- Non-ferrous scrap: Includes metals such as aluminum, copper, and zinc, which have higher economic value due to their use in advanced sectors like automotive and electronics.
The quality and purity of this metal are critical in determining its value, directly impacting recycling efficiency and the properties of the final metal product.
Economic impact of scrap recycling
Metal recycling not only cuts production costs but also stabilizes supply chains by reducing dependence on virgin raw materials. Industries such as construction and technology are increasingly incorporating scrap into their processes to optimize resources and meet stricter environmental standards.
Additionally, using it requires significantly less energy compared to producing primary metals. For instance, recycling aluminum consumes only 5% of the energy needed to produce it from bauxite, resulting in substantial economic and energy savings.
Scrap in financial markets
Scrap has become a key Commodity, with prices established in markets like CME (Chicago Mercantile Exchange) and LME (London Metal Exchange). These contracts allow companies to plan costs and mitigate risks associated with global market volatility. In emerging regions, the growing demand for recycled materials is driving the development of specialized trading platforms for scrap.
Scrap in 2026
Ferrous scrap barely moved in 2026, and that is the story. Through the first half of the year, busheling, shredded, and heavy melt traded sideways week after week, while U.S. hot rolled coil pushed above $1,000 per short ton. The gap between what a mill pays for scrap and what it sells steel for widened to unusual levels.
Tariffs explain much of it. The 50% Section 232 duty pulled steel production into the U.S., where mills ran near 80% capability utilization, and it also turned scrap flows inward. U.S. scrap exports fell about 15% in 2025 to their lowest level since 2016, while imports rose roughly 10%, much of that from Mexico and Canada. More scrap chasing the same domestic mills kept prices flat even as steel climbed.
For Mexico this market sits close to home. Mexico is the second largest destination for U.S. scrap exports, and the Monterrey and Saltillo corridor is where most of the country’s steelmaking demand sits. Domestic ferrous prices there tracked sideways through July, in step with the U.S. market.
That spread between scrap and steel is what an electric arc furnace mill actually earns. The CME lists futures on both busheling and HRC, so the margin itself can be hedged rather than each leg on its own.
Data as of mid-July 2026. For current levels, talk to the InHedge hedging desk.
Innovation in metal recycling
Advanced technologies, such as automated separation systems and quality analysis tools, are revolutionizing the metal industry. These innovations enable more precise classification, improving recycling efficiency and maximizing the value of recovered materials.
Frequently asked questions
What is ferrous scrap used for?
It is the main feedstock for electric arc furnace steelmaking, which accounts for more than half of U.S. steel output. Grades include busheling, shredded, and heavy melting steel.
How is scrap priced and traded?
Through CME futures on U.S. Midwest and Chicago busheling, quoted in dollars per gross ton and settled against Fastmarkets assessments. Busheling is the CME’s second most established steel contract after HRC.
What is the scrap price in 2026?
Ferrous scrap traded flat through the first half of 2026, with busheling, shredded, and heavy melt moving sideways for weeks at a time. Prices reset monthly. For current levels, talk to the InHedge hedging desk.
Why did scrap stay flat while steel prices rose?
U.S. steel tariffs pulled scrap into the domestic market and cut exports, leaving ample supply for mills even as finished steel prices climbed.
How do companies hedge scrap?
Through CME busheling futures, often paired with HRC futures to hedge the metal spread rather than one leg alone. InHedge designs, executes, and monitors these structures. See metals hedging at InHedge.