Scrap metal yards: stock valuation, hot work, cylinders and customer property

A yard whose value changes with the market

Scrap stock values can vary with prices, material mix and quantities held. An unchanged annual figure may not reflect peak exposure or the policy's valuation basis. Identify how stock is valued, the maximum holdings and any reporting or declaration conditions rather than assuming one year-end snapshot describes the whole period.

Before renewal, plan the valuation conversation. Decide what question you are answering: the highest value you could hold, the typical level or the average over a year. Then ask how the policy deals with the difference, whether it permits periodic declarations and whether any average condition could reduce a claim if the figure is too low at the time of a loss.

Valuation basis and peak holdings

Ferrous, non-ferrous, catalytic converters, cable and processed bales have different values and different theft attractiveness. Separate them in your records. Note whether you value stock at purchase cost, current market price or the contract price you have agreed with the next buyer, because the policy basis may differ from your accounts.

Keep a simple weekly record of tonnage by type, with the date and the price used. When prices spike, test the effect on the declaration. If your insurer allows adjustment, agree the process in writing. If it does not, consider how much margin to build into the declared figure rather than trusting that a loss will happen in an average week.

Hot work: permits, fire watch and evidence

Cutting torches, grinders and welding are everyday tools in scrap processing, and many insurers attach conditions to them. Typical themes include a permit system, clearing combustibles, having extinguishers to hand and a period of watching the area afterwards. The precise requirements belong to the wording and to your own risk assessment.

A condition is only helpful to you if you can show it was followed. Use a simple permit sheet recording date, location, person, time finished and the check afterwards. Keep these for the policy period. If a fire occurs and the permit trail is missing, an insurer may question whether a condition was met, which can affect the claim.

Gas cylinders and sealed containers

Oxygen, acetylene, propane and refrigerant cylinders can arrive in loads, be used for cutting or be stored on site. They create fire, explosion and injury exposures that influence both property and liability discussions. Explain how cylinders are stored, separated and checked and what happens when an unknown cylinder is found in incoming material.

Shears and balers add another danger in the form of sealed containers, tanks and pressurised items. Describe your inspection process and training, and record incidents. The general HSE material on work equipment is a useful baseline for guarding and safe operation, but it does not tell you how an insurer will weigh your particular controls.

Batteries, fluids and end-of-life vehicles

Vehicle batteries, electrical scrap and fluids raise fire and pollution questions. Say how batteries are removed, where they are stored and how quickly they leave. Describe the treatment of oils, fuels and coolants, the surfacing under vehicle storage and the drainage arrangements.

Pollution wording and property wording answer different questions. A fire at a battery store may involve property, interruption and clean-up cover, each with its own triggers. Read the exclusions for stored hazardous items and ask whether specific storage conditions apply, so that you are not discovering them after an event.

Customers’ vehicles, plant and property in your care

Yards often hold things they do not own: customers’ vehicles awaiting dismantling, machinery brought in for sale as scrap, containers or materials under contract. Standard property wording may exclude property in custody or limit it sharply, and an item can be at risk before you become its owner.

List what is typically held, for how long, and who bears the risk under your terms. Check whether the policy covers damage during movement within the yard and by your plant, and whether motor-trade-style exposures exist if you drive customers’ vehicles. Written terms of business that clarify when ownership passes help both you and your insurer.

People, plant and theft

Heavy handlers, cranes, shears and vehicles create a steady stream of injury exposures, and employers’ liability underwriting will look at guarding, training and supervision. Maintain inspection and service records and make sure the activities you declare match the work staff actually do, including labour-only and agency workers.

Metal theft and cable theft are specific concerns for property terms. Explain perimeter protection, CCTV, lighting, alarm response and cash or payment procedures. Be honest about past losses and what changed after them. These details do not guarantee a quotation, but they let an underwriter assess the actual yard.

Cash, payment records and regulatory context

Scrap dealers operate within a regulated environment for payment and record-keeping, and insurers sometimes ask about it, particularly where theft of metal or cash handling is concerned. Explain how you identify sellers, record transactions and handle payments, and keep these records accessible. Requirements vary by jurisdiction and change over time, so rely on current official guidance rather than a summary written for insurance purposes.

Insurance does not stand in for compliance, and a policy will not usually respond to penalties. Nonetheless, a business that can show orderly records generally presents a more coherent risk than one that cannot. Include a short description in the submission, covering how records are stored, who checks them and how long they are kept.

What to bring to the discussion

Bring a stock record by metal type, evidence of peaks, a hot-work permit sample, a cylinder storage description, a statement of what is held for customers, plant and vehicle lists with values, and claims history. Add any recent surveys and the action taken on them.

Appetite for scrap metal varies and cover is subject to insurer acceptance and the final wording. Oak can review your presentation and discuss how the programme fits the yard, but this guide is general information, not confirmation that terms are available.

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