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Why Metal Scrap Is No Longer Residue but a Competitive Advantage

By Saulo Guzmán - Wieland Metal Services Mexico
General Manager


By Saulo Guzman | General Manager - Tue, 08/01/2023 - 12:00

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Recycling metals is Fundamental to  achieve a circular economy as the world  moves toward an energy transition to become more sustainable, accompanied by very aggressive decarbonization goals.

This new global trend is impacting the way business is done. Governments and NGOs are putting the rules together, big companies are setting their own goals, and technology development and the markets are also demanding decarbonization. All these forces combined with the supply and demand outlook for nonferrous metals will make metallic scrap more relevant than in the past for all businesses along the value chain.

Here are some reasons why knowing how to properly handle your scrap can provide a big advantage for your company:

1. Environmental Stewardship: Properly handling metallic scrap demonstrates a commitment to environmental stewardship. By recycling scrap, companies can reduce their carbon footprint, conserve natural resources, and minimize the negative environmental impacts associated with mining and extraction activities. This can enhance the company's reputation and appeal to environmentally conscious customers.

2. Compliance With Regulations: Many countries have regulations and policies in place to encourage or mandate proper waste management, including the recycling of certain materials. By handling metallic scrap in compliance with these regulations, companies can avoid penalties, legal issues, and reputational damage.

3. Enhanced Sustainability Reporting: Increasingly, stakeholders, including investors, customers, and employees, are interested in the sustainability practices of companies. Properly handling metallic scrap allows companies to include recycling and waste reduction efforts in their sustainability reports, demonstrating their commitment to sustainable business practices. This can improve stakeholder relationships and attract socially responsible investors.

4. Revenue Generation: Companies can generate revenue by selling their metallic scrap to recycling facilities. Depending on the market conditions and the type of metal, companies receive payment for their scrap materials. This additional income can contribute to the company's bottom line.

Depending on the metal, the scrap from  the manufactured product can be significantly high, making it important to consider the scrap’s resale value in your pricing. This can make the difference between being competitive or not. Even more so in Mexico where certain manufacturing processes are much cheaper than the metal itself.

Copper is among the most valuable metals for the scrapping business; pound for pound, it is worth more than most other common metals and is considered the king of non-ferrous metals. However, not all copper alloys have the same value as there are many alloys that have many different metals in their composition, which changes its value in the market. Also, the value of copper tends to have higher fluctuations over  time, making it a metal that needs to move fast or be properly hedged to be covered against the quick swings in price.

Companies that want to benefit from a proper scrap policy need to be aware of how the product is handled in their facilities, even more so for Mexican companies that have Immex or maquiladora status because if done properly they can see cash flow benefits from not having to pay 16% VAT for importing  on the definitive status of the metal.

Here some of the minimum requirements for proper handling and getting more value from your metallic scrap:

1. Segregate your product by alloy: When properly separating the alloys, your scrap material, in terms of  nonferrous metals, has more value as you will save valuable time and resources when it is time for the scrap dealer to sort the product. 

2. Segregate your metal if contaminated: When materials have some sort of contamination, such as  too much oil, lead, mercury or many other substances,  those products need to be specifically identified as contaminated to ensure their  proper handling and processing.

3. Segregate your metal depending on your import status: If you have maquiladora or Immex status, you already know the importance of keeping your inventories according to their import status and treating them differently in order to comply with Annex 24. This is also the case for your scrap. If you mix your definitive import material with temporary material, it will be difficult to match the quantities so your pedimentos match. Hence, you will need to pay 16% VAT for a regime change. If segregated properly, you will save 16% of the value of the scrap, boosting cash flow.

4. Use proper containers: If your containers and the products you ship are not easy to handle, or are not efficient for transportation,labor for repackaging will impact your resale price in the same way as when your packaging is not efficient on freight. Remember, metal moves by lbs/kgs not by pieces.

5. Make sure security measures are in place: Theft is always a risk when talking about scrap. Metal is highly transactional and markets tend to be opaque, so a lot of cash can be acquired easily and without traceability. This is an incentive for people to steal your scrap. Use containers that are not easy to open, and cameras and metal detectors.

Generally ,the metal processing industry will have to rethink and better plan how its scrap is treated and handled. When done properly, it can be a competitive advantage in the marketplace and also benefit the world through more sustainable actions, such as recycling.

Photo by:   Saulo Guzmán

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