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Scrap Metal Recycling Opportunity – Profitable Business Plan Overview

Waste materials generated from metals are called metal scrap. The United States is the leading generator of metal scraps amounting up to 135 million ton of scrap every year. Over 59 million tons of metal is produced from such scrap every year.

The US scrap metal recycling market is around $52.5 billion and is expected to grow at 7.8% CAGR from 2020-25 reaching a 75-billion-dollar market. The overall industry is more that 100 billion dollars. It generates jobs and is a source of business for many.

There are various other positive aspects of scrap metal recycling like reducing metal waste and reducing exploitation of natural resources, but this article only concerns the economic aspect of scrap metal and how recycling them can be a good source of business returns.

The article focuses on the following:

  • Overview of scrap metal recycling business
  • How one can start metal recycling business
  • Overall expenditure, resources and utilities involved
  • Impediments, challenges and opportunities
  • Returns and growth prospect

Overview of Scrap Metal Recycling Business

The United States has a huge market of scrap metal recycling employing 1.46 lakhs of people in the industry and exporting close to 18 billion dollars of produce from scrap metals. Steel and iron are the most known metals that are recycled to the most of their capacity and sometimes close to 95%.

Since metals are used in the majority of products and therefore the scrap material generation remains in flow without any shortage. What is required is a proper strategy to collect those scrap and then recycle it. Later on, the recycled material needs to be sold to the right business in order to fetch maximum returns. 

Now, metal recycling is a very wide sector and in order to start your recycling venture, one needs to choose the right niche suitable to you based on various aspects. The important aspects that should shape your selection are:

  • Total expenditure in order to produce the recycled product
  • Availability of raw scrap at cheap price keeping in mind the cost incurred due to logistics
  • Market competition and your scope in making a way for yourself
  • Availability of resources, manpower, finance, etc. on your part
  • Market scope for selling the recycled product and the maximum and minimum profit that can be made
  • Profit margin, growth prospect in the industry and value addition

Lastly, the regulations, licensing, ease of recycling, etc. also matter including taxes and government incentives involved.

How can one Start Metal Recycling Business?

After duly complying with the first step as mentioned above, you need to select the niche of your business. For this, you need to carry out a feasibility analysis report which will cover all the aspects of your metal recycling business. 

Based on the report you need to write down a comprehensive business plan which will have directions laid down to take steps in furtherance of your aim. Now, starting a metal recycling business has complications and is of complex nature. 

This article will address those key issues instead of mentioning the common steps. 

Step 1: Knowing your Market well:

It is of utmost importance to know each and every thing about your business market. If you are dealing with copper or iron scrap, you must have knowledge about the sources from where you will obtain the scrap, how much cost you will incur, and how much raw material you need. 

Secondly, how does the recycling process work? The input you will put and the output you will get. What will be the efficiency of recycling certain metals, the amount of energy and time required and much more. 

Thirdly, what will be the quality of the recycled product? Where there will be byproducts of recycling and how can they be used? Moreover, what will be the cost incurred in the overall recycling process?

Fourthly, what are the resources, machines, catalysts, etc. required to supplement the whole recycling process? 

The answer to all this question requires you to go deep into the recycling business and market.

Step 2: Setting up your Recycling Plant:

Not getting into the legal formalities first, what you need is to set up the plant. Recycling metal is considered to be a heavy industrial job and therefore requires a factory like setting. You need a space good enough to operate as a factory for recycling metals. 

There are various parts in this. You need a space to store the raw metal scrap. Then another space is required where you will segregate the metal scrap and then clean it. Third space will be the factory and machine space where recycling will take place.

Fourth space will be dedicated to give a finishing touch to the recycled product and if some byproduct or further waste is generated then it also needs to be stored. Lastly, you need space to package the recycled product and then ship it to the location.

Apart from that, you also need space for your laborers, factory men, engineers, etc. Some space will also be needed to park the scrap vehicle or other such vehicle required for transportation. Furthermore, a factory-based office for yourself and your team might also be necessary to work.

Recycling Plant: Recycling plant is the place where the actual recycling takes place. It can also include the segregation space where the raw metal scrap is segregated from other unwanted waste and is then cleaned. 

The actual plant is where the metal scrap is treated further in order to make it ready for recycling. A metal recycling plant generally contains installed machines used for recycling. They are a melting machine, segregator, cleanser, refining machine, shaping machine, cooling machine, grinder, compressor, grinder and heating tools. Some also form part of resources.

You need to install the whole setup as per the advice of your chief engineer whose job is to supervise you. 

Step 3: Managing Resources

The first resource for you recycling business is the metal scrap. Team up with scrap pickers, waste collectors, and other such people who deal with metal waste. Fix the rate for metal scrap and the quantity you need for recycling. 

The second resource is obviously the machine along with equipment necessary for carrying out the recycling process. For cleaning, segregating and recycling, you will also need some chemicals. Get it from the market based on the metal you are recycling, the quality you expect based on your engineer’s advice.

Machines and equipment like cleaner, segregator, compressor, boiler, melting machine, big containers, refinery, cooling machine, grinder, etc. are also necessary. Some specific tools may also be required based on the metal you are recycling. 

Lastly, you will need other miscellaneous items like water supply, motor pump, electricity, vehicles, large vessels, and similar equipment for your recycling plant. 

Step 4: Manpower

You need skilled persons to supervise the whole recycling work. An engineer or a person with similar qualifications will suffice. Apart from that, you will need laborers who will do the physical work. 

Based on the size of your factory and the quantity of scrap to be recycled everyday, you can hire laborers who have at least some training and experience in a recycling plant. You can have few experiences while others can learn under their supervision. 

Security staff, driver, office employees for managing accounts, dealings with clients, etc. can also be hired based on requirement. Care about the budget expenditure while hiring employees and laborers so that you don’t run out of money.

Step 5: Investment and Finance

Your business plan and feasibility analysis report will give you a fine estimate of the budget required to start and run your recycling business. The only thing to care about is how you can efficiently manage your budget without going for shortcut methods.

Minimization of expenditure can be done by making a choice between renting resources and buying them. Renting the factory space or buying it. Similar other choices can be made in efficiently managing your money. 

Step 6: Marketing and Growth:

It is important to collaborate with people who can offer you good returns from the recycled product. Therefore, you need to build contacts and networks in the recycling industry. This is where the real challenge is since your product is ready but you need the good market to sell.

It is advisable for you to work for sometime in such a recycling industry in order to gain experience, knowledge and networks so that you can use it at the right time. These contacts and networks are built over years based on mutual benefit and trust. 

Also, always have the strategic view regarding your business market so that it is easier for you to maneuver over the market and growth aspect. Logistically, it should be feasible to manage both raw scrap and recycled products. 

There are many challenges that you will face but when you have got the key to the market then it becomes easier for you to run your business. Also, be smart in adding value to your product and collaborating with people who can enhance your business. 

Make regular changes with time to fit into the market demands. The change is rapid and what worked yesterday won’t necessarily be working tomorrow. 

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