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Authorities in China and the EU, for example, are setting targets to increase the recycled volumes of metals such as copper and lithium.
Demand for services to match the procurement needs and suppliers of scrap metal has also emerged in the secondary space, which is still dominated by many small-to-medium-sized participant entities scattered around the world.
“The market for secondary metals – both as scrap metal and afterwards as recycled metal to be used as raw material for smelting – is very fragmented globally and within the regions,” Rafael Suchan, co-founder of Metycle, told Fastmarkets in an interview on Wednesday, March 22.
“Fragmented markets are much more receptive to digital marketplaces because they take away the problems of demand and supply ‘finding’ each other in an efficient way,” he added.
Suchan is well known to the industry, having overseen Germany’s Scholz Metal Recycling. He teamed up recently with long-time colleague Sebastian Brenne, who successfully built a major business-to-business (B2B) trading platform, CheMondis, for the industrial chemicals sector.
The duo established Metycle in 2022 and secured €1.5 million ($1.6 million) in seed funding on March 21.
The platform will offer “verified companies” different payment solutions, including escrow payment services, or payment in a local currency. If required, the platform will also “step into the transaction to ensure that products are being delivered and payment is being made,” Suchan said.
The exact number of clients using Metycle was not disclosed, but Suchan said that the majority of its registered clients were non-ferrous scrap companies.
It was hoped that the platform would be able to resolve some longstanding issues in scrap metal industries, such as hedging and foreign exchange risks, through an upcoming collaboration with a European financial services provider.
Hedging over metal price volatility has not been a “mainstream” practice in the scrap sector, with it being described over the years as foreboding and pointless by scrap executives.
Legacy misconceptions among some scrap market participants included that they needed an exchange contract to match the exact product they want to hedge, while many scrap metal products are not traded on commodity exchanges.
Whereas mineral deposits can be concentrated in specific geographical areas – for example, 70% of the world’s cobalt is mined in the Democratic Republic of Congo (DRC) – scrap metal can be recovered from “urban mines” anywhere across the world.
Secondary resources are much less tightly controlled than the primary space, where capital barriers such as the necessary investment in mine construction are much higher.
It is not uncommon to see commodity giants dominating certain metal deposits and stocks. But these days, even major miners would find recycling interesting.
For example, US copper giant Freeport McMoran ventured into the metals recycling business in Spain last year, and European copper smelters such as Aurubis, Montanwerke-Brixlegg and Boliden were all marketing their use of copper scrap as a greener way to produce copper.
Every country is a potential producer of scrap metal, in Suchan’s opinion, but the quality and quantity of scrap metal materials still vary widely depending on the development phase, technology, consumer product cycle and environmental policy of each economy.
And the old controversies about the traceability of primary ores and concentrates – whether those are mined ethically, without the use of child labor, and not exploiting the rights of indigenous peoples – are still valid in the scrap metal industry.
On a global scale, it is hard to defend the integrity of the entire supply chain in terms of collecting, generating and trading scrap metal.
One clear example is that, after China completely banned imports of category-7 scrap three years ago, Southeast Asian countries such as Malaysia, Indonesia and Cambodia became intermediate processing hubs to convert low-quality scrap metal into high-quality scrap that China will import.
Chinese customs inspections appear to have become obsessed with shiny surfaces on imported scrap metal, so some Hong Kong recyclers have gone as far as to set up workshops polishing off paint and dirt on scrap metal cargoes for fear of it being rejected, a non-ferrous scrap trader source told Fastmarkets.
The value added by this cosmetics process is questionable, but the scrap metal would still be marked as coming from Hong Kong, the same source added.
Any form of verification, such as proof of scrap metal sources, recorded on independent platforms could provide more credibility to the secondary metal supply chain.
“We bring customers onboard in a structured process,” Suchan said, “whether from developing countries or from developed ones. We directly connect the supply of scrap where it arises with the demand for scrap where it is being recycled. The buyers get access to metal scrap from trusted sources, and the sellers can be sure to have a smooth sales process.”
And Metycle is not the only electronic platform targeting the growing market potential of the multi-billion dollar scrap metals industry.
More scrap trading platforms have been launched over the past two years, including Outlast Earth, founded by a group of former aluminium recyclers, and the Chinese-run Doctor Scrap, which prides itself on its “scrap recognition” technology.
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