Standard Costing Allocation of Extrusion Press Yield Losses under IAS 2 Rules
Capitalizing abnormal extrusion yield losses into inventory violates IAS 2 rules, inflating balance sheet assets while risking sudden covenant write-downs.
Lme Secondary Scrap Pricing
Meaning
Market benchmarks for recycled metal show the trade-in value of non-primary materials as determined by global exchange activity. Metal buyers use lme secondary scrap pricing to calculate the cost of inputs for alloy production where virgin material is not required. This rate functions as a floor for contract negotiations with industrial recyclers and influences the total unit cost of goods.
Market Benchmark
The London Metal Exchange tracks the price of high-grade scrap to provide a transparent reference for the industry. While primary ingots cost more, lme secondary scrap pricing offers a lower-cost alternative for foundries that can handle higher impurity levels. This transparency prevents local suppliers from overcharging based on regional scarcity.
Procurement Index
Contracts for the supply of recycled aluminium or copper often include a formula tied to this global index. Changes in lme secondary scrap pricing lead to immediate adjustments in the monthly invoices sent to the factory. To hedge against future price spikes, procurement officers use this data to lock in volumes whenever the index is low.
This protects the manufacturing margin. Such strategic buying prevents market volatility from stalling the plant.
Cost Floor
Secondary metals rarely trade significantly below this benchmark because of the ease of global transport. This index defines the minimum price a seller expects for their material.