How To Start Metal Recycling Business
Metal recycling involves reproducing used metal products like cars, steel, aluminum, etc. into new products. The alternative is to devise means of extracting the minerals and raw materials from the earth in their original form. The presumed junks are re-produced and transformed into different products which are then sold to consumers as new products. But by way of explanation, metal is not only in the form of aluminum, it includes materials such as gold, silver, lead, tin, copper-nickel, etc.
Scrap metal recycling business is dirty, and indeed it is one of the dirtiest businesses one can set up. This can be seen in the process of cleaning the metal up, melting it, and converting it to different products. It can be said that the business is lucrative and requires heavy capital outlay as well as technical know how. Those in this business would agree that the process of arriving at the final product can be long, so it doesn’t require only patience; it requires a lot of determination and perseverance to succeed in this business. However, if you are successful, the following are the potential benefits that would accrue to your business:
- The operation of a scrap metal re-production plant is cheaper in energy consumption when compared with the extraction of such metals from the earth in their original form.
- The market for the end product of metal recycling is huge which translates to making the business a lucrative one.
- As more people are becoming eco-conscious cum the government toeing the part of environmental protection, the scrap metal recycling business is potentially going to grow un-interrupted in the foreseeable future. This is because the scrap metal recycling business is environmentally friendly.
- Following from item 3, being in the business of scrap metal recycling as an entrepreneur, you are contributing your bit towards an environmentally friendly society by reducing the emission of smoke and greenhouse gas compared with the greater amount released by the extractive industry.
- Your recycling business when it becomes operational will likely contribute to the national economy in the aspect of job creation and boosting the Gross Domestic Product.
Why Do We Recycle Metals?
Scrap metals are materials that have been discarded after prolonged use. The same scrap metal can be recycled to produce different types of metal products. The recycling can take place over and over again without affecting metal properties. Ordinarily, scraped metals are waste materials and without much value attached but when re-cycled, the value can be greatly enhanced. The value attached after recycling is high and consequently, the demand for it is high, and recycling companies buy scrap metals for recycling and making them into different products. Other reasons for recycling:
- Preservation of Natural Resources
In order not to starve the earth of its natural resources, the existing metals must be recycled. Mining of metal is a continuous process and areas excavated are depleted and miners are constantly in search of new areas to mine, which means the process is endless. To preserve our natural and save the environment, the existing metals should be recycled.
- Reduction of Emissions
To prevent further destruction of the ozone layer and stop the emission of carbon dioxide into the atmosphere, the only way out is to embrace the recycling of metals and solid wastes. With this, the environment should be preserved.
- Economic Development
The cost of mining and processing of mined products is enormous when compared with the cost of recycling metals. These savings can be diverted to finance other developmental programs that will stimulate the economy. Even the recycled metals can be exported and this will generate further revenue for the government and improve the living standard of the citizenry.
- Management of Energy Consumption
Metals recycled or processed from the raw ore are the same. The properties of both mined ore and re-cycled metals remain the same. It follows therefore that if metals are recycled, the demand for the natural metal which costs more to produce will likely go down. So it makes economic sense to recycle instead of mining ore and processing it. Besides, there are the economic benefits derived from recycling metals than processing mined ore.
Quick facts about metal recycling
Almost all kinds of used metals can be recycled, but from statistics, only 30% of metals are recycled. The following facts are also available:
- Statistics show that about 42% of crude steel in the US is produced from recycled products.
- Statistics also reveal that about 100 million steel and tin cans are used and discarded on daily basis in the US.
- About 40% of global steel production is produced from recycled steel
- Nearly 400 million tons of metal are recycled every year globally.
- Globally steel and iron are recycled more than any other metal product because the chances of recovering large structures are greater and also they are easier to re-process.
- Aluminium cans are the most recycled products in the US for the time being.
Types of Metals Recycled
Metals can be classified into three categories, namely; ferrous, non-ferrous, and others. Ferrous metals are made up of iron or alloy of iron such as carbon steel, wrought iron, alloy steel, and cast iron.
Non-ferrous metals consist of aluminum, lead, zinc copper and tin while the others are the precious metals such as gold, silver, platinum, and palladium
The Metal Recycling Process
The Metal Recycling Process
The metal recycling process is the stages the scrap metals go through before they are made for industrial purposes such as the production of cars, trucks, ships, railways, airplanes, etc. in these final stages, they can also be used to produce domestic items such as crockery, cutlery, and even for packaging. The metals are first collected by whatever means, sorted out by types and properties, processed, purified, melted and solidified, before being transported as metal bars. The following are the eight stages scrap metals go through before being used for further production of other products.
- Collection
The collection of different scrap metals is the first stage in the process of recycling. It is all about picking different materials that are of metal origin and putting them in a container. There is a different container for each property of the metal. In some places, centers are created that are responsible for receiving the scrap metals and paying people who bring in the scraps. People are therefore encouraged to search for and even buy from other people who have collected the metals and then take them to the center for sale. Different categories of metal attract different prices, depending on their properties, grade, and quality.
- Sorting
The collected metals are separated according to what is re-recyclable and non-recyclable. The non-recyclable are discarded while the recyclable are retained for processing. It is important at this stage to point out that the quality of metal paid for at the collection center must be of high quality to ensure that only metals of high quality is recycled. So it means that quality control checks must be mounted at the collection center to ensure the only good quality metal is processed. Scrappers should segregate clean metals from dirty materials to enhance the value of recycled metal.
- Processing
After sorting, the next step is to compact or squeeze the metal. All the recycled materials are squeezed and squashed using machines so that they do not occupy so much space in the conveyor belts.
- Shredding
After the crushing and breaking of the metal, the shredding process starts. The metals are broken down into tiny pieces or sheets to allow further processing. The small pieces have a large surface to volume ratio that can be melted using less energy as compared to when they are in large pieces of metal. Normally, steel is changed into steel blocks while aluminum is converted into sheets.
- Melting and Purification
Melting of the scrap metal takes place in a large furnace. Each metal is taken to a furnace that is specifically designed to melt that particular metal based on its specific properties. The melting process uses a considerable amount of energy. However, the energy required for melting recycled metal is less compared to the energy required to make metal from the raw material stage. The furnace is heated to appropriate degrees capable of melting the particular metal. Melting can take minutes or hours depending on how big the furnace is, the volume of metal placed in the furnace, and the heat degree of the furnace.
- Purification
Purification is the process of the melted metals undergoing refining to ensure final products are impurities free and high-quality product is made. There are two types of purification: electrolysis is the main purification type and the other type uses a powerful magnetic system that segregates metals from other recyclables. These days, however, there are other ways to purify metals following the metal type.
- Solidifying of the Metal
Once the melting of metals is over, the next stage is to carry the melted hot metal by a conveyor belt to a cooling chamber to cool and solidify. When the melted metal has cooled enough, it is converted into specific shapes and sizes such as bars that can be used to make other products. At this stage, other chemicals are added into the molten metal to give its thickness and other properties.
- Transportation of the Metal Bars
The metal bars are now moved to factories and other places where these bars are needed as raw-material for use to make new brand products of various shapes and sizes.
When new products using these bars have been used and their lives have elapsed, the recycling process begins once again.
Re-cycle Industry Overview
The metal recycling industry generally is capital-intensive and requires a lot of money to set-up and run. In the US, it has been an essential part of the economy and employs about 146,000 workers.
Figures from 2015 in the US show that the re-cycling industry produced to specification 130 million metric tons of scrap metal, textiles, plastic, electronics, and rubber, with an estimated value of about $80 billion. The materials benefited industries globally including the US and have boosted the US economy by nearly $18 billion in export sales.
The metal recycling industry is crucial to the US manufacturing industry since it supplies essential elements to the industry. Besides, it is environmentally friendly and with the growing focus on the adverse effect of greenhouse emissions, the metal recycling industry is making a positive contribution. Therefore it must be said that the recycling industry is one of the drivers of the US manufacturing industry, with its contribution to the export trade and creating thousands of jobs.
On the other hand, if one could picture a world without recycling, the pollution would have been worse with greenhouse emissions on the rise; the effect would be a faster diminution of the natural resources. The metal recycling industry has made and it is still making a useful contribution by positively converting millions of discarded materials into economic use by the manufacturing industry, as well as protecting the air, water, and land.
The metal recycling industry is said by experts to have a brighter future with projected annualized growth of about 1.9 percent. Since it is on the side of positively contributing to a better environment, it will continue to enjoy the support of the environmentalists, and of course the Federal Government.
Aspiring entrepreneurs, big or small, are encouraged to go into metal re-cycling business as it is highly profitable and government financial support can be available. So if you are ready, we shall take you through the steps to starting this lucrative business until you begin to make a success out of it. Shall we?
HOW TO START METAL RECYCLING BUSINESS
- Conduct feasibility study and market research
- Create a business plan
- Scale your business
- Reach out to the market
- Choose the type of metal to re-cycle
- Equipment for the recycling business
- Sources of metal scrap supplies
- Summary
Conduct feasibility study and market research
There is the need to investigate the industry in general and the metal recycling market in particular to have a detailed understanding of the different types of re-cycling available, what type of re-cycling to undertake, and which re-cycle business will be more profitable. For instance, you have to determine whether segregating metals based on their properties, type, and quality or merely melting them into particular shapes and sizes.
Or you can decide which level of re-cycling you can undertake as there are different phases of metal re-cycling that are possible. They may include the following:
- Metals segregation
- Metals cleaning
- Metals refining
- Metals melting
- Shaping metals
- Metal cooling
- Metal refining and polishing
It is up to you to decide how much you can do based on your resource capacity and level of expertise in the recycling business. Normally there are many areas in the metal recycling business you can specialize, for example, you can concentrate in either re-cycling scrap steel and iron or re-cycling non-ferrous scrap materials.
So it is important to define your market so you will know from the outset what you are going to re-cycle and supply the market. The following are some niche areas of concentration a newbie metal re-cycling company can begin within the industry.
- Steel and iron scrap recycling
- Copper scrap recycling
- Aluminum scrap recycling
- Lead scrap cycling
- Other non-ferrous scrap metals’ re-cycling
Create a business plan
The metal recycling business is relatively a big business venture and should have a plan that will guide you as well as attract venture capitalists to invest in the business. The business plan will cover the following areas of the re-cycling business:
- The type of re-cycling business to undertake and the stage/s of re-cycling you would choose to carry out.
- Whether you want to be just a buying center or go into the metal re-cycling proper.
- What is likely to be your scale of operation in terms of investment required?
- Are you going to start the re-cycling business from the scratch or buy-in into a franchise?
- Which location will be suitable for your business – convenient for local deliveries or for export?
- Which location will afford you the space required to do your business without resorting to buying extra land or leasing more property?
- Equipment required for business: What is the nature of the equipment that should suit the nature and level of your business?
- Is the equipment going to be rented or purchased outright and where is the funding going to come from?
- Are you going to finance your re-cycling alone or you are going seek for external bank funding, or venture capital?
- What is the total capital expenditure you are likely to incur and other operating expenses for the day to day running of the business?
- What is the projected income for the next six months to one year after taking off?
- Which type of metal re-cycling commands better prices in the market and which are in great demand?
Scale your business
If you opt to open a general metal re-cycling business; a facility designed to buy in scrap metals, and if you are thinking big and wish to open a recycling centre, focussing on converting scrap metal materials, then you need to deploy huge financial resources in property purchase, equipment, and manpower. However, if you decide to begin at a lower level, with a few specific metals to re-cycle, your initial investment will relatively be lower.
Reach out to the market
Find out the level of competition in the market, the level of prices for both scrap metal and re-cycled products and do your calculations well. You can obtain the current prices in the finance section of your local newspapers as well as the scrap metal pricing journals. You can get real prices from the recyclers by visiting them and even know their number; it will help you in your calculations. You will also need to know the estimated volume of scrap metal processed monthly and annually in your area of operation.
Read Also: Why Market Research is Important to Small Business
Choose the type of metal to re-cycle
Make a selection of the type and the stages of metal re-cycling you would wish to focus on using the information you obtained when you reached out to the market. The type and level of operation you decide to choose depends entirely on your resources and your ability to manage a facility such as metal recycling.
Equipment for the re-cycling business:
Find out the right equipment based on your type of re-cycling and the level you want to operate. The following are some of the important equipment and machinery you will need to set up your scrap metal recycling facility. They may be procured second hand or brand new.
- Baling and Sorting machines
- Conveyor belt system
- Steel material processing machine
- Shredders, Cable Granulators,
- Catalytic Converter Recycling Machine,
- Melting furnace,
- Power plant
- Processing Wire Looms and Harnesses,
- Alligator Shears,
- Ingot casting machine,
When it comes to choosing between renting and leasing a facility for your scrap metal recycling company, the size of the scrap metal recycling company you want to own, and your entire budget for the business should influence your choice.
Manpower needs:
The number of people you employ at the start will depend on the scale you would like to operate. If you decide to operate on a large scale, you will need the services of key officers such as
- Chief Executive Officer (if you not occupying this position),
- Administration and HR Manager,
- Transport and Logistics Manager,
- Business Development/Sales Executive
- Chief Accountant,
- Recycle Plant Engineers/Technicians, and Operators
- Scrap Metal Collection Truck Drivers
- Customer Services Executive/Front Desk Officer
However, if you are going to operate at a low scale, you need a fewer staff of about ten until the business begins to pick up.
Read Also: How to Set Employee Compensation
Sources of metal scrap supplies
Find out the location of scrap pickers, scrap sellers, and link up with them for a regular supply of scrap metals. Depending on the scale you want to operate, buy metal scraps from individuals; it will be cheaper than scrap sellers and other wholesalers, otherwise, adjust where you buy as necessary.
In summary:
It is important not to overlook the legal aspect of metal re-cycle business because they are essential to your business operations. Since the business of metal recycling is dirty and relatively dangerous, strict control id enforced both within the organization and at the State level. These legal documents consist of the following:
- Certificate of Incorporation
- Scrap Metal Dealers Operating License
- Commercial Vehicle Operator’s Registration for haulage trucks
- Driver’s licenses
- Assistant’s licenses
- Health inspection Certificate
- License for the service support facility (recycling plant)
- A recent inspection report
- Tax Payer’s Identification Number
- Fire certificate
- Business Licenses and Permits
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (Letters offering employment).
- Employee’s Guidebook
- Functioning Agreement for LLCs
- Various Insurance Policies for metal recycling business
- With these documents in place, the metal re-cycling company can be run without being on the wrong side of the law.