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Scrap metal dealer sector trends

(last updated July 2019)

What has been happening in the metals recycling industry

Scrap metal is used in steel production and, depending on which steelmaking process is used, makes up a significant proportion of the feedstock fed into the furnace. So demand for scrap metal is directly affected by the current level of demand for steel worldwide, which in turn is closely linked to the state of the global economy. In the UK the decline of the heavy manufacturing sector has reduced the long term demand for steel, as has the increasing use of plastics.

During the early years of the 2000s, overcapacity in the steel industry forced down steel prices, although the global demand for steel remained strong. This had a knock-on effect on scrap metal prices, which fell considerably from the prices achieved during the late 1990s. The mid and late 2000s saw a rise in steel and scrap metal prices, largely as a result of a huge increase in demand for steel in China. This helped those scrap metal businesses that had survived the difficult years of the early 2000s. However, the global economic downturn that began in 2008 led to a slump in demand for steel - so that scrap metal prices plummeted. Prices did improve in 2010 and remained reasonably firm into the early 2010s, and by 2013 the economy seemed to be strengthening.

Economic conditions continued to improve during 2014 and scrap metal prices remained reasonably high. Although the UK economy continued to strengthen during 2015 and 2016, the global steel industry (the main customers for scrap) slumped, largely because of demand from countries like China and Brazil falling sharply. There were thousands of job losses at UK steel works during 2015 as China flooded export markets with cheap steel. This led to an oversupply of scrap metal globally and to a very sharp fall in scrap metal prices. 2015 was a very tough year for scrap metal dealers, with many yards cutting back on the number of employees. There were quite a few business failures too. Although prices picked up during 2016 and 2017, and it is forecast that demand for steel will recover a little, the outlook for the scrap metal industry is still challenging. There are some indications of the trade being helped by the fall in the value of sterling following the Brexit vote, which has made the cost of exports cheaper and discouraged imports. However, the uncertainty following the vote and resulting from the Brexit negotiations has had a dampening effect on the economy, which is not good news for the sector.

One of the side effects of higher scrap metal prices in the mid to late 2000s was an increase in thefts, particularly of cable and metal from the railways, utility companies and other sources. This led to the government announcing measures to tighten up regulation of the industry and to ban most cash transactions in England and Wales from December 2012 - and all cash transactions in England and Wales from October 2013. A cash ban was introduced in Scotland from 1 September 2016 and a similar ban is likely to be introduced in Northern Ireland, although small payments (less than £100) are likely to be exempt. According to the National Crime Agency (NCA), metal thefts continue to decline, although they acknowledge that increases in the price of lead and a potential increase in the price of copper may have an impact on the level of theft. The British Metals Recycling Association (BMRA), however, found the NCA report 'surprising', saying that, anecdotally, metal theft was rising. Both the NCA and BMRA acknowledge that due to rising prices, thefts of lead from church roofs have been increasing.

The rules and registration scheme for scrap metal dealers and vehicle dismantlers were also overhauled when the cash ban was introduced, with considerably tougher rules coming into force. Following the cash ban, some larger scrap metal dealers decided to introduce an on-site cheque cashing service to people they buy scrap from - they pay the seller by cheque to comply with the law and then the seller can have their cheque cashed straight away for a small fee. While acknowledging that the licensing requirements and the cash ban have reduced thefts, the BMRA feels that there needs to be stricter enforcement and tougher penalties to prevent illegitimate operators having an advantage over legitimate operators.

Other issues that have affected the recycling industry include:

  • increasing costs as a result of environmental legislation regulating the disposal of goods such as vehicles, fridges and batteries
  • the problem of sourcing good quality scrap - when scrap prices are low people don't bother about bringing in their unwanted metal items to sell
  • high and generally rising fuel prices, affecting transport costs (although 2015 and 2016 did see fuel prices dip sharply)
  • efforts by many local authorities to clamp down on noise levels from itinerant collectors' loudspeakers and chimes
  • the need for greater security at metals recycling yards to deter thieves

You will have to decide whether:

  • there is sufficient demand in your area for another link in the metals recycling 'chain'
  • you will be able to source sufficient quantities of scrap
  • you will be able to comply with the requirements of environmental and health and safety legislation
  • you will be able to weather downturns in scrap metal prices

Keeping up to date with developments

Joining a trade association is an excellent way of keeping up with developments in your industry. Both the ferrous and non-ferrous sectors of the metals recycling industry are represented by the British Metals Recycling Association. The BMRA offers members a wide range of services like regular bulletins and industry information. You can find out more on their website.

The Chartered Institution of Wastes Management (CIWM) represents the waste industry as a whole in the UK.

Subscribing to a trade journal is another excellent way of staying up to date. Metal Bulletin journal contains a wealth of articles of interest to those operating in the metals recycling industry, as well as details of scrap metal prices. You can find out more on their website.

Visit letsrecycle.com for topical information about the metals recycling industry as well as current scrap prices.

The International Steel Statistics Bureau (ISSB) produces statistics showing global production of steel.

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