Ferrous Scrap Grades Explained: HMS 1&2, Shredded, P&S, Turnings and Busheling

The problem is not the price, it is the label

Most yards negotiate hard on price and then give the money back at the intake gate.

A truck rolls in. The weighbridge operator has a queue behind it, a supplier arguing about last week's deduction, and a rain shower starting. The material is a mixed load: some heavy plate, some light sheet, a bin of turnings that somebody says is "mostly clean". The operator picks the grade that is fastest to type, or the one the supplier claims, and moves on. Ninety seconds saved at the gate.

Six weeks later the mill pays out on what it actually received, not on what was written on your ticket. The gap between those two numbers is real money, and because it never appears as a line item anywhere, it looks like "market conditions" in the monthly P&L.

Grade discipline is the cheapest margin lever in a ferrous yard. It costs nothing to buy. It only costs attention.

What the common ferrous grades actually are

Grade definitions vary by mill, by country and by contract. The ISRI specifications are the reference point most trade contracts lean on, but every buyer applies their own tolerances on top. What follows is the practical working understanding, not a contractual definition. Always read the buyer's own spec sheet.

HMS 1 (Heavy Melting Steel 1)

Wrought iron and steel scrap, generally at least a quarter inch thick, cut to charging size. Clean material: no coated steel, no tin, no light gauge sheet, no chain, no cast. Think plate offcuts, structural sections, thick pipe, rail crops. HMS 1 is the workhorse. Because it is dense and clean, it melts predictably and yields well, so it commands the top of the melting-grade range.

HMS 2 (Heavy Melting Steel 2)

The same idea with the tolerances relaxed. Black and galvanised steel scrap is allowed, lighter gauges are allowed, and the material is generally less uniform. It still needs to be cut to size and free of the disqualifiers, but a mix of thinner sections is acceptable. HMS 2 sits below HMS 1 on price because the yield per tonne is lower and the residuals are higher.

HMS 1&2 (the blended grade)

This is where most trading actually happens, especially in export. HMS 1&2 is sold at a stated ratio, most commonly 80:20, meaning 80 percent HMS 1 by weight and 20 percent HMS 2. The ratio is the price. If you buy a load as 80:20 and it is genuinely 60:40, you have paid an HMS 1 price for HMS 2 tonnes and you will not find out until the load is inspected downstream. The blended grade is the single most common place where mis-grading hides, precisely because "HMS 1&2" feels like a category when it is really a formula.

Shredded

Homogeneous fragmented scrap produced by a shredder and then magnetically separated. Typically fist-sized pieces, low residual, very consistent density. Because a mill can charge it with confidence, shredded usually prices close to or above HMS 1 depending on the market. It is the grade where consistency, not weight, is the product.

P&S (Plate and Structural)

Cut plate, beams, channels, angles and structural sections, usually with a minimum thickness and maximum dimensions defined by the buyer. Dense, clean, high yield. P&S is a premium grade and is often the material that quietly gets buried into an HMS 1 pile because the intake operator did not have a separate bin for it.

Turnings and borings

Machining swarf from lathes, drills and mills. Long stringy turnings, short broken turnings, and fine borings all behave differently in a furnace. This category is heavily discounted because it carries cutting oil, coolant, moisture and fines, and because it burns off rather than melts if not handled properly. Turnings also cake, absorb water and gain weight in the rain, which is why moisture deductions on this grade are so contentious.

Busheling (No. 1 Busheling)

New production offcuts from stamping plants and fabricators: clean, dry, uncoated sheet steel in small pieces. No oil, no galvanised, no rust of consequence. Because it is a known chemistry from a known source, busheling is a premium grade and is often bought on contract directly from the generator rather than through the yard gate.

A quick mental ranking

Positions move with the market and with your buyer mix. The ordering is stable. The spreads are not.

Why mis-grading is silent

A pricing error is loud. Someone notices that you paid 500 rupees a tonne too much and asks why. A grading error is silent, because the tonnage is correct, the payment matches the grade written on the ticket, and every downstream document agrees with every other one. The system is internally consistent and externally wrong.

Consider a yard that takes in 40 tonnes a day of what it books as HMS 1, and suppose that around 15 percent of that is really HMS 2 by weight. If the spread between the two grades is 2,000 rupees a tonne, the daily leak is 12,000 rupees. Nobody sees a 12,000 rupee hole. They see a slightly disappointing gross margin, and the explanation is usually "prices were soft this month".

The same mechanism runs in the other direction and hurts just as much. P&S booked as HMS 1 means you sell premium material at a mid-grade price. Clean busheling tipped into a general ferrous bin loses its identity permanently. Under-grading is not conservative, it is a donation.

Three things make this worse than it needs to be:

• The grade is decided by the person under the most time pressure. The weighbridge operator is the only human who sees the material and the ticket at the same moment, and that is exactly when the queue is longest.
• The supplier's declaration becomes the record. If the ticket defaults to what the supplier wrote on the challan, the yard has outsourced its grading to the counterparty.
• Nothing forces a second look. Once the truck tips, the material is in a pile with other material and the evidence is gone.

Capture grade at the scale, not in the office

The most common fix attempted is a month-end reconciliation: compare what was bought as HMS 1 against what was sold, and back out the difference. This does not work, and it is worth being clear about why. By the time the material is in a pile, grade is no longer a fact you can recover. It is a guess you are constructing from tonnage arithmetic. You can detect that a discrepancy exists. You cannot attribute it to a truck, a supplier or an operator, which means you cannot fix it.

Grade has to be recorded at the moment of weighing, by the person looking at the material, as a required field. That is the whole discipline. In practice it means:

Make grade mandatory on the ticket. Not a free-text note, not "ferrous". A controlled list of grades your yard actually trades, with sub-grades where you sell them separately. If an operator cannot save the ticket without picking one, you have eliminated the largest category of missing data in the business.

Photograph the load before it tips. A photograph attached to the ticket is the only evidence that survives. When a supplier disputes a downgrade three weeks later, or when you want to review whether an operator is systematically generous with HMS 1, the photograph settles it in seconds. This is also what makes it safe to downgrade a load at intake, because the operator has proof and does not have to win an argument alone.

Record the blend ratio, not just the blend name. If you buy HMS 1&2, capture the assumed ratio on the ticket. It converts a vague grade into two numbers you can test later.

Let the operator downgrade without a manager. If reclassifying a load requires a supervisor, at 3am the operator will accept the supplier's grade. Give them the authority and the audit trail, then review the pattern weekly rather than approving each one.

Record deductions separately from grade. Moisture, dirt, non-metallics and oversize should be their own deduction lines, not absorbed by quietly writing a lower grade. Mixing the two destroys your ability to analyse either.

Keep the grade attached all the way through

Capturing grade once is not enough if it dissolves at the next step. The grade recorded on the ticket should be the same grade that the material carries into inventory, into any processing or sorting job, and onto the sales invoice. Where processing changes the grade, that should be an explicit transaction with an input grade and an output grade, so yield is measurable instead of assumed.

How to think about grade-level margin

Once grade is captured reliably at both ends, the analysis becomes simple and unusually honest. For each grade, the question is: what did I pay per tonne, all in, and what did I realise per tonne, all in?

The purchase side needs the landed cost, not the headline rate. That means the rate paid, plus freight in, minus deductions applied, divided by the net weight actually accepted. The sale side needs the realised price, which is the invoiced value adjusted for any downgrade, moisture or shortage the buyer applied on receipt. Weighted-average costing per grade is what makes these two comparable, because it stops one unusual purchase from distorting the picture.

Suppose an illustrative month looks like this:

These figures are illustrative, not measured. The point is the shape of the answer, not the values. Three things fall straight out of a table like this:

Volume is not margin. Turnings can be a quarter of your intake and a tenth of your gross margin. If the yard is celebrating tonnage, it is celebrating the wrong number.

Buyer-applied downgrades become visible. If your realised price for HMS 1 sits persistently below the contracted rate, the difference is downgrades on receipt, which is a direct measure of how optimistic your intake grading is.

Suppliers can be ranked on grade accuracy, not just price. Split the same analysis by supplier and you will find that the supplier offering the best rate is sometimes the one whose loads get downgraded most often. That comparison is impossible without grade on every ticket.

The follow-up questions are the useful ones. Which suppliers deliver loads that hold their grade? Which operators grade differently from their colleagues on the same material? Which grades are worth the labour cost of sorting at intake, and which are not? None of these can be answered from a tonnage report. All of them are straightforward once grade is a required field on the scale ticket.

Where a system helps

None of this needs software to be true. A yard with a disciplined operator and a well-designed paper ticket can grade accurately. What software changes is whether the discipline survives volume, staff turnover and night shifts.

Scraplytics is built around that intake moment. Grade is a required field on the scale ticket, tied to weighbridge capture and photo capture at the gate, so the record is made once by the person looking at the material. Inventory is tracked by category and grade with weighted-average costing, so landed cost per grade is a number you read rather than reconstruct. Reports and analytics let you cut margin by grade, supplier and location, and multi-location yards can compare the same grade across sites to see where grading standards have drifted.

The point is not the software. The point is that grade is a fact that exists for about ninety seconds, at the weighbridge, and then never again. Everything else in this article follows from whether you write it down.