How to Start a Scrap Metal Business – A Closer Look At Unexplored Profitable Business Venture

Among various recycling businesses, Scrap metal business holds unique importance. We all know metal recycling is not a new business model or something that was newly invented; However, making money out of scrap metal is something that is still unexplored. Leveraging the full potential of Scrap Metal recycling can be a profitable venture

Especially in Developing nations, scrap metal recycling has abundant opportunities, however, due to poor infrastructure or lack of technical advancement, most of them still follow the conventional methods and end-up with a small profit margin.

In this article, we are going to cover, how to start a scrap metal recycling business and different types of scrap metal that can be recycled, and ways to leverage the market opportunities in this business. So if you’re interested in starting a scrap metal recycling business, keep reading!

Metal recycling business

Why Scrap Metal Recycling is a Great Business Idea?

Environment! is the no.1 factor that makes the metal recycling business a great business idea, Any business that contributes to a better environment can be a great business idea, and Scrap metal recycling is one among them, By recycling old metals and items that have been damaged by age, weather, or other factors. We are not only just re-using them for making better things, But it is indirectly helping in contributing to reduce the exploitation of Virgin metals

By sorting and processing the scrap metal, we can also help reduce the amount of waste that ends up in landfills.

What Type of Metals can be Recycled

When it comes to metal recycling, there are two different sorts of material that come to play 1) Ferrous metals and 2) Non-Ferrous metals. In simple words, ferrous metals contain iron and non ferrous metals do not.

Both of them have high demand in the market; However, the price for each metal is different due to the demand in the market. Here are the different types of ferrous and non-ferrous metals and where they are used

Ferrous Metals (mostly Iron)

  • Alloy Steel – construction tools and electrical components
  • Carbon Steel – mostly used in machine tools like drills, taps, and springs
  • Cast Iron – Automobile engines, farm equipment, mining equipment, stoves

Non-Ferrous Metals

  • Copper – wirings, pipes, fittings, electrical components
  • Aluminum – Food cans, beverage cans, window frames and utensils
  • Lead – Batteries, Ammunition, cabel sheathing, lead weights, pipes
  • Zinc – electrical equipment, used as a coating on iron or steel to prevent rusting
  • Tin – food cans, used as coating metal

Facts and Figures of the Metal Recycling Industry

The global metal recycling market size was expected to reach $368.7 Billion by 2030 with an CAGR of 5.2% from 2021 – 2030

Ferrous metals such as Iron and steel are the most important raw material for the US steel industry. In 2019, U.S. Mills utilized more than 60 million metric tons of recycled material to produce 87 million metric tons of steel.

Among different metals, High-grade scrap Copper holds 95% of its value compared to its primary metal. It is one of the reasons why high grade copper recycling provides high profit margin for recyclers

Aluminum recycling is by far one of the most cost-effective and efficient metals to recycle. In fact, it just takes 5% of energy to recycle Aluminium when compared to the original aluminum

Most steel items today contain 25% and 100% recycled material

Profitable Aspects of Scrap Metal Business

Availability of raw material and demand are the two major factors that make scrap metal business a profitable one

There are multiple ways of doing this business. Either you can run the business as a scrap collector or a start a scrap recycling plant; either of them has their own advantages

Scrap metals have high demand in almost all kind of industries such as Construction, Manufacturing, automobile, food, beverage, medical, and information technology. Allowing an uninterrupted business demand

This is still one of the unexplored industries in developing nations. If utilized properly, entrepreneurs from these nations can establish a good business in their region

The infrastructure required to start this business is also considerably less. It would take approximately $2000 to $10000 of initial investment to start a scrap collection center; whereas, if you want to run a full-scale recycling center, then you may need to invest about $250,000 or more depending upon the machinery and scale of recycling capacity

Construction and automotive industry are the biggest sources of scrap metal industry; they pay you to collect their scrap. These industries scrap contain high demand metals that can be recycled and sold for high profits margin

How is Scrap Metal Recycled?

The process of scrap metal recycling begins by recovering valuable metals from discarded objects. This includes items like appliances, cars, and machinery and then, sorting them into different categories. The most common metals recycled are copper, aluminum, and steel. These three metals are usually separated by weight, with heavier metals being recycled first.

The metals are then chopped into small pieces and heated until they become liquid. This liquid metal is then poured into a vat and mixed with a chemical called a slag. The slag helps to form a solid surface on the metal, which makes it easier to remove the metal from the scrap

The scrap is then pulled out of the vat and placed into a drum. The drum is rotated, which causes the scrap to fall into small pieces. The small pieces are then washed and dried

The metals are then separated from the other materials and then sold to companies that use them in new products.

How to Start Scrap Metal Business

Metal recycling can be a lucrative business. There are six key aspects that you need to keep in mind when starting a scrap metal recycling business. such as….

  • Having a Business plan in place that helps in providing a feasibility report
  • Ensuring Proper documentation is obtained to run the business. Which can include business registration, insurance, licenses, and permits
  • Finding a location that is convenient for transportation and storage
  • Establish pricing policies that are fair to both you and your customers
  • Marketing plans to promote your business
  • A software or record to track inventory and sales to ensure that you’re making a profit

Lets, dig deep into these aspects

1. Having a Business Plan

First you’ll need to have a proper business plan on how you want to run your scrap metal business. There are several factors to analyze before getting started that can influence the budget and expenses of the business. Following are few things that you need to pay more attention when getting started

  • Deciding a business model (scrap collector or scrap recycler)
  • Deciding a market segment. Which industry do you want to sell your recycled items to? Such as Automobile, basic commodities, and the packing industry, etc.,
  • How you are going to lay out the pricing plans for your clients
  • Marketing strategy
  • Measures taken to manage inventory
  • Managing workers: This should cover detailed information on wages, training, and safety of the workers

Once you have done the research and are ready to lunch your business, you need to ensure legal requirements to run the business are also covered.

This includes business registration. Depending upon your business capability you can register your business as a sole proprietorship or partnership or LLC and Corporation

You also need to ensure your business is insured. There are several insurance plans that help cover both your employees and your business. Make sure to choose the one that is right for your business.

When it comes to Licenses to operate a recycling center. There can be different rules and regulations that are set by your state or city authorities. You may need to observe zoning restrictions that can limit your operating hours. You also need to ensure your business is complying with environmental regulations such as noise levels and dust pollution are within the limits

3. Find a Place to Collect Scrap

Before selecting a location to start a recycling center. You must need to know where you are going to get the scrap from. This is a very important step in the business. There can be different locations where you can get scrap metal such as industrial areas, commercial areas, and near high residential areas, etc.,

Once you have found an ideal location where you think you can get scrap metal abundantly, you then need to analyze whether the scrap metal has demand in the market or not. See if you will get a good amount if you recycle that metal or not.

If you do not analyze these factors properly you will end up buying scrap metal that has no demand in the market or provides you low return on investment.

4. Selecting a Location for Starting a Scrap Metal Recycling center

Your metal recycling center should be located in an area that is near industrial zones or commercial areas. It should be easy for trucks to load and unload the scrap. It should also have ample space to store or dump a large amounts of metal waste.

Following are certain areas that are good sources of scrap supply. If you can find a place that is near all these following spots, then you will mostly be able to have a regular supply of scrap

  • Commercial zones – Shopping complexes, Office zones
  • High residential area
  • Construction sites
  • Automobile garages or repair centers

5. Managing Transportation

Transportation is a key aspect of the scrap metal business. It is important to note that metal waste can be heavy and is also not advisable to carry it manually. Hence you need to have a good capacity commercial truck that can carry loads of metal waste to your recycling center.

If you believe that there will not be a high moment of scrap coming to your recycling center every day; then, renting a vehicle is the best option

6. Equipment Required for Metal Recycling

There are several types of machinery used for recycling metal waste. These machines are designed to crush, shred metal into pieces, and even separate wires from casing. In addition to that, you also need some basic hardware tools to manually recycle the metal waste.

Here are some of the commonly used metal recycling equipment and their uses

Metal Shredder MachineHelp to scrap large metal pieces into small pieces that are easy to recycle and transportation
Wire separator MachineUsed to separate wires from cables. Especially used for separating copper wires from cables.
Scrap aluminum shredderMainly designed to shred aluminum objects like cans and lightweight metals etc.,
Scrap car crushing machineUsed to disintegrate used cars, automobile parts, and motorbikes and turn them into small metal pieces
Scrap balersUsed to crush and compress scrap metal into dense blocks that are suitable for handling and storage
Power drills and Hardware toolsTo dismantle metal objects for ease of recycling process
Eddy current separatorThis machinery is mostly used to separate nonferrous metals from industrial waste. It is highly used to separate metals like copper, Aluminium, die-cast metal etc.,
Magnetic separator MachineThis is mostly used to separate ferrous metals from non-ferrous metals and impurities, it is mostly used to extract iron metals from the scrap
Different Types of Metal recycling Equipment used in Scrap Metal Business

In addition to the above, you also need to ensure your workers are equipped with protective gear while handling the materials. This may include helmets, aprons, shoes, gloves, face shields and nose masks, etc.,

7. Connecting with Local Scrap Collectors

Once you start your business, you need to get in touch with local scrap dealers, This allows you to stay updated about current metal prices, market trends and you will also know better about materials identification

Be in touch with all metal recyclers around your city and see if they have any requirement that you can supply and also ask them if you need any requirements. Exchanging of needs will help you to establish connections that can benefit your business continuity

8. Staying Updated with Current Scrap Metal Prices

Metal prices in the market are known to fluctuate constantly, it is always recommended that you keep a check on the prices. You can follow news or read newspapers daily

Or even try searching on the internet with phrases like “Copper scrap price today”, “cast iron scrap price today”, “aluminum can price”, “brass scrap price”, “lead scrap price” etc.,

There are also apps that help you to stay updated with current metal prices such as iscrapapp, RIM, and ScrapMarket

Please also note that local metal prices might differ slightly from the national average hence you also need to cross-check before you decide on a price before selling or buying the scrap.

9. Marketing and Advertising your Scrap Metal Business

Most businesses in the recycling industry underestimate the power of promoting a business. This can be due to several underlying reasons. However, marketing and advertising can actually boost your business. Whether you are a big recycling company or a small one. Always try to invest some amount in marketing and promoting

There are several ways to promote a recycling business such as distributing flyers to locals, giving ads in local newspapers, radio stations, T.V and even on social media platforms

Final Notes

Scrap metal business is still one of the underutilized business sectors in several countries, there is a lot of scope and opportunities in this business that is capable of providing employment in a large scale. You do not need to invest lot of money in this business. You can start with less and gradually increase your capability

However, technological advancements and infrastructure need to be improved a little faster once you start this business. As these are the two factors that can improve the efficiency of your recycling center and also improve your Business standards.

How much does a scrap metal business make?

With the right pricing and collection system in place, a scrap metal business can make a decent amount of money it can be anywhere from $1,000 to $3,000 a day depending upon the amount of scrap that you recycle or sell. A typical scrap metal business can expect to earn $40,000 to $60,000 per year

What Metals can be recycled

There are different metals that can be recycled, However few metals such as, aluminum, copper, lead, brass, and stainless steel are most commonly used in recycling. Each of these metals has different properties that make them perfect for different applications. For example, aluminum is often used in construction because of its lightweight and strong properties. Copper is a good conductor of electricity making it extensively used in Wiring and Plumbing. Lead is often used in batteries because it is dense and has a high melting point. Brass is used in musical instruments because it has a warm sound and is resistant to corrosion. Finally, Stainless steel is often used in kitchen appliances because it is durable and has low reactivity.

Where to Recycle metals

The best place to recycle metals is at a local scrapyard. Here Metals are recycled into new products or shred it to pieces that are ready to be used for industries. Not all scrap yards have recycling capabilities; most of them just do the primary process of shredding, and sorting metals that are ready for industry use. However, few recycling centers have the capability to recycle metals by charging few amounts.

How to Start Scrap Metal Recycling Business

To get started in scrap metal recycling, you need to assess your current business capability and determine what type of business you would like to start. There two ways of doing this business, either you can start a scrap metal collection center or a Metal recycling center and there are also several types of metals that can be recycled which you need to analyze before starting the business.

After you’ve determined your industry and business type, you’ll need to gather the necessary materials and equipment. This will include a collection area, crusher, and shredder. You’ll also need to obtain licenses and permits, as well as insurance to run the business.
Once you have all of the necessary materials and equipment in place, it’s time to get started scrap metal recycling

How profitable is recycling business

The recycling business is definitely a profitable one, according to a report, the global waste recycling service market is valued at 55.1 billion U.S. Dollars in 2020 around the world and it is expected that by 2028 it would reach about 90 billion U.S. dollars

Is scrap metal business profitable

There is no definitive answer to this question. Scrap metal business can be profitable depending on your location, the type of metal you dealing with, and the market conditions. Before starting a scrap metal business, make sure to do thorough research and consult a qualified professional. There are a lot of global factors that can affect metal recycling profitability.

How much does it cost to start a scrap metal business

There are two things to consider before estimating the cost of starting a Scrap metal business. if you are just beginning as a scrap collector you would need around $10,000 to $25,000 of initial investment which covers basic business necessities such as a rented location, a few machines to recycle, a used truck, and a small office space. However, if you are starting a complete metal recycling unit you need a large location to set-up a recycling unit, and industrial-grade machinery, and employees to run the plant. You’ll also need to buy raw materials, such as metal scraps and recycled materials. This would cost around $250,000 or more

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1 thought on “How to Start a Scrap Metal Business – A Closer Look At Unexplored Profitable Business Venture”

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