Scrap metal //
Run a tight ship
and you’ll sail
through the storm
By Jacqueline Ong
IT’S been a while since Inside Waste
cast its eye on the scrap metal
recycling sector. Things looked dismal
back in 2014, with the closure of Alcoa
and high profile players including
scrap metal recycler CMA Corporation
going into liquidation. At the time, the
Australian Metal Recycling Association
(AMRIA) said: “the whole creation of
recycled metals is on its knees”.
In April, the Australian Council
of Recycling CEO Grant Musgrove,
commenting on Arrium being placed in
administration, said policy makers were
warned in late 2015 that China was
willingly or inadvertently destroying
the market for steel and scrap metal.
He said ACOR had forecasted a fall
in scrap metal prices, which rang true,
and said that there was now a global
oversupply of scrap metal making the
material a liability rather than an asset.
According IBISWorld’s scrap metal
recycling market research report, the
sector has faced tough conditions
over the past five years, with revenue
between 2011 and 2016 declining by
5.7% annualised.
“This can be attributed to falls in
scrap metal prices over these years,
lower output volumes from industry
players, and declines or low growth
in many downstream markets,” the
report noted.
Has the sector truly fallen on hard
times? Inside Waste spoke to three
players in the sector, mid-tier recycler
Queensland Metal Recyclers (QMR), a
national company and one from the
bigger end of town, Sell and Parker,
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INSIDEWASTE AUGUST 2016
and equipment supplier CSS Equipment
to get a feel for where the sector’s at.
In the strong wind even
turkeys can fly
One thing that all three companies
agreed on was that times are tough.
With scrap metal prices being as low
as they are and overheads staying put,
margins have naturally shrunk.
“The low prices are obviously a
concern for everybody. We are all
struggling at the moment,” QMR owner
Nick Chambers said.
“The other thing we’re struggling
with is that there are a few people
quoting more money than what it’s
[scrap metal] worth to keep clients
and machinery busy and some of the
big companies are guilty of doing that.
When people are quoting more money
than it’s worth, no one’s making any
money except the client.”
Chambers and Sell and Parker CEO
Luke Parker were also on the same page
when asked if the end of these tough
times was in sight. The answer is no.
“I think we’re in for a lean period for
a long time,” Parker said.
Parker added that the real issue was
the “massive over supply of iron ore”,
which continued to subdue the scrap
metal market.
“China exports steel and that’s where
the battle is. The allegation is that
Chinese mills are dumping steel and
our local steel mills are struggling to
compete,” he said.
“The bigger issue is that there is
just so much cheap iron ore and cheap
energy in the market so the price of
steel will be cheap. As long as the price
of steel is cheap, the price of scrap will
be cheap.”
The survival of scrap metal recyclers
will now depend on their ability to run
a tight ship and keep operations lean.
“The people who are doing better
are the ones who are more nimble
and they are the ones who can invest
in equipment and processes to reduce
their cost. It’s all about minimising
expenses,” Parker said.
“It’s all about efficiency. In the
strong wind, even turkeys can fly. When
things get a bit tougher, it’s survival of
the fittest.”
“I don’t think the end [of the
downturn] is anywhere in sight and
we’ve still got a lot of hard work to get
to the end of the tunnel. But if you can
get through the tough times and you
run a leaner, tighter, and more costeffective ship in tough times, you’ll
be able to get through it in the longterm,” Chambers added.
When one door closes...
In order to survive, a number of midtier scrap metal recyclers have turned
to other avenues to generate revenue.
Chambers said that was QMR’s
strategy when the Global Financial
Crisis hit in 2008, driving the company
to deal with export markets directly. In
2009, QMR began buying equipment
and today, it either chops up scrap
metal with shears or compresses
the material into blocks with “a big
static press” for shipment overseas.
If the company hadn’t done that and
continued to rely on the larger players
instead, it would be in dire straits
today.
“But because the medium-sized
companies have gone out to export and
deal directly with companies overseas,
that has made us stronger in the
marketplace,” Chambers said.
“The bigger opportunities have
been restricting us from growing and
when they restrict you from growing,
in tough times, you’ve got to look for
other companies. We export directly
overseas now and we don’t rely on the
bigger companies.
“The medium-sized companies have
said [to the big guys], if that’s all you
can pay us, and we know it’s worth a lot
more and you guys are making plenty
of money, [then] we need to also start
getting that money you’re making.”
There is, after all, no lack of
export markets.
“There are plenty people buying
scrap, plenty of places to buy scrap
from. What the bigger companies do
is shred the metal and sell it overseas
in bulk cargo. So they load a whole
ship up with 10,000-20,000 tonnes.
We might load 50 or 100 containers up
and do 3000-4000t a month. It’s on a
smaller scale. When the world economy
is struggling and metal prices are
falling, it’s harder to sell big cargos,”
he said.
CSS operations manager Neil Coyle
said he has certainly noticed this shift
in the last 12 to 24 months as well, and
companies that were once traders and
had lower volumes of material than the
larger companies, were now exporters.
“Obviously noticing that with the
scrap prices being quite bad, a lot of the
smart scrap companies started looking
for an edge. In doing so, there’s been a
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