The US Regional Ferrous Scrap Model

Frank Giarratani
and
Gene Gruver

Center for Industry Studies
Department of Economics
University of Pittsburgh
Pittsburgh, PA 15260 

The U.S. regional ferrous scrap model analyzes spatial variations in prices for two categories of ferrous scrap (high- and low-residual) using a logistic model of choice to characterize transactions in ferrous scrap markets. It has been shown to be tractable and empirically successful. For a given year, the model uses a computer generated equilibrium framework to solve for prices that support the observed spatial distribution of supply and demand quantities. The model's geographic detail is highly disaggregated. Place-specific prices are generated for 1212 supply and 240 demand regions. Also, the model can be used to describe detailed flows of ferrous scrap across regional boundaries, and thus it allows for predictions of total scrap availability in each region of demand after accounting for likely product flows from all supply areas. The validity of the model has been analyzed by comparing solution values to a subset of published prices. Maps of the solution clearly delineate price gradients that are highly characteristic of known geographic pricing patterns.