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Blog March 2022

Five Macro Trends shaping the Global Scrap recycling sector and what it means for automation

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Conor Dowd Product Marketing Manager

Trend 1: Quality counts and impurities cost 

It used to be the case that scrap metal from US, Europe and some other countries would be exported to China. As a result of cheap labor, it made economic sense to send scrap metal there, for it to be processed and recycled.

In 2017, US scrap exports were worth a total of $17.9 billion with 31% of these ($5.6 billion) heading to China.

But after China banned imports of scrap metal in January 2021 (it has subsequently allowed some imports that meet very strict quality criteria), exporters looked to other destinations such as Malaysia and Vietnam. As a result, these countries then looked to introduce their own restrictions to ensure the quality of imported scrap metal was high.

While there are some countries that are easier than others to export ferrous and non-ferrous metals to, the overall trend is that global trade of scrap will be based on it being a quality product.

Trend 2: Scrap Recycling is coming home 

There has been a move to onshoring of scrap recycling in North America driven by trends such as tariffs on imported steel, increasing quality regulations in Asia as well as investment in local infrastructure to satisfy growing local demand.

Processing domestically for quality has meant more liquidity, and more domestic buyers to sell to as they invest in new facilities. 

As shown by Fastmarkets, there has been investment in steel-making capacity in the United States, while China’s Jingye Steel bought British Steel in March 2020. 

This was also backed up recently by Recycling Today, which highlighted that the challenges of export were making US scrap firms look at domestic markets. This was leading to investment in new facilities such as Novelis’ $365 million recycling center next to its automotive finishing plant in Kentucky.

For example, the largest growth markets in the first eight months of 2021 according to US Commerce Department data (as reported by Recycling International) were:

Indeed, this trend could become more pronounced as the European Union is proposing to ban exports of scrap metals to non-OECD countries unless those countries notify that they wish to receive EU waste exports. (Argus Media).

Trend 3: Feedstock of materials is becoming more diverse

The mix of scrap metals to be recovered and the associated complexity of recovery is becoming more complex and challenging for scrap recyclers.

To illustrate this, lets take the example of auto bodies which represent a major feedstock material for scrap recyclers.

Changes to the automotive industry could potentially have a major impact on scrap recycling.

Firstly automobiles (particularly new electrical vehicles) contain an increasingly diverse mix of ferrous, higher levels of non-ferrous and polymer components. This provides both opportunities and challenges for scrap recyclers. Note that the same trend is true for white goods such as fridges which contain more and more electronic components.

The circular economy may herald new models for car ownership where service providers and manufacturers may own most vehicles and rent them as a service to consumers.

Volvo and some other manufacturers have already developed subscription services that means you pay a monthly fee and get the car, maintenance, roadside assistance, and any taxation included in the fee. 

Over time, this shift is likely to mean that there are less cars owned by people, and more by fleet companies. This will mean that these companies will have greater data and ability to predict when they need to replace vehicles and will have contracts in place for dismantling rather than scrapping of these. Indeed, because they will want to be as sustainable as possible, it is likely they will want to see closed loop systems implemented.

Automotive manufacturers are rapidly rolling out electric vehicles (EV), and consumers across the world are moving away from internal combustion engines to EVs. 

These EVs tend to be at the vanguard of sustainability, with manufacturers designing for recyclability. With the need for quality, crushing and shredding cars may not be the most economically and environmentally sustainable action, with dismantling becoming more common worldwide. 

Indeed, the EU is currently proposing an update of its ELV Directive to include more detailed provisions on design of vehicles to facilitate their dismantling and recycling, and the use of recycled materials. 

An example of how EVs are changing automotive recycling is that many EV cars are being fitted with aluminum body panels rather than steel. These aluminum body panels will have higher value than steel, so dismantling for quality makes more sense than shredding for general steel usage.

Trend 4: Market consolidation will accelerate

There is more and more consolidation occurring in the scrap metal industry. Efficiencies driven by scale are meaning smaller operators are taking the decision to sell to a major corporate. 

These larger, often multi-national businesses have the resource to invest in new technology and bring efficiencies that the small operator can struggle to replicate.

It is also the case that those who produce the finished product are wanting to get more involved in the scrap sector. For example, 2021 saw a number of metal producers acquiring scrap companies.

With record profits, US mills have placed spare cash into the rapid expansion of melting capacity, with five of the largest 11 ferrous scrap processors in North America now owned by steel mills. 

Large mills and scrap metal recyclers are expected to intensify efforts to merge and acquire competitors and smaller yards this year and in the coming years.

Trend 5: Sustainability will drive innovation

The circular economy is a new way of seeing the world. Digital technology is a new way of acting in it’.

Sustainability has become the key driving force shaping the global scrap recycling industry as there is wide recognition of the role of scrap recycling both in conserving natural resources such as virgin ores as well as in the reduction of carbon emissions. 

Scrap yards are sometimes referred to as ‘urban mines’ to provide the global economy with sought-after and critical metals to allow their customers to use more recycled material in the future. 

Sustainability is driving innovation in both processing technology (e.g., sorting, processing etc.)  as well as in the adoption of digital transformation technologies to allow recyclers to be more efficient, collaborative, and agile. 

This innovation will see an exponential increase in the use data and digital transformation tools to underpin the emerging circular economy. Scrap recyclers will be able to leverage their vast reserves on data on materials and products, their use, origin, design and how they are transported and recycled. This data can then be used to collaborate with manufacturers, customers, and suppliers to create new circular and sustainable business models. 

What do these trends mean for automation of scrap recycling? 

There will be continued strong demand for scrap metals as global economies develop and innovation drives new metal requirements.

Increased market transparency on scrap costs and sale prices means that the timeless challenges of maximizing operational efficiency and reducing cost are now more critical than ever.

According to Mark Valdes-Dapena of AMCS, the industry response should be to embrace automation across the enterprise and adopt a driven approach to making important business decisions. 

Automation can positively impact every aspect of scrap recycling operation and particularly where it links and connects all the processes to ensure maximum visibility on shared data and collaboration.

This level of automation and collaboration is now possible but only by leveraging the latest Cloud technologies.

Despite this innovation, the old industry adage will still prevail that scrap is bought and not sold, so automation should focus on  tight inventory management and increasing cost efficiency across the recycling value chain.

New circular economy models, such as the examples above in the automotive industry will favor companies that can readily share data and collaborate using the latest digital tools with key partners such as suppliers, customers, and manufacturers. 

In summary, the future belongs to those companies that are agile, operationally efficient collaborative and are data driven.

The AMCS Platform for Metal is an enterprise-grade cloud software platform designed to automate and optimize all the processes of a scrap recycling company including, dispatch purchases, compliance, scales, grading, production, inventory management, sales, brokerage and outbound logistics. 

To learn more about the AMCS Platform for Metal, please click here.

Going to WasteExpo 2022? Please come and visit us at Booth #2038 at the Las Vegas Convention Center, West Hall on the 29th-12th May – book an appointment with us here. 

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