Steel manufacturers will increasingly use scrap metal as an input, supporting industry demand
Los Angeles, CA (PRWEB) July 01, 2012
The Recyclable Material Wholesaling industry is dominated by the scrap metal market. Increasing global demand for steel supports this market, since scrap metal is used to produce it. Before the recession, increased demand for scrap to feed the world's steel furnaces (including primary metal manufacturers) caused average annual steel and iron scrap metal prices to increase significantly. A rise in scrap metal prices generally translates into revenue growth, but conditions changed considerably during the recession, with excess supply and falling demand dragging prices down and putting the pinch on wholesalers. Nevertheless, wholesalers still managed to grow their revenue over the five years to 2012, with significant sales of scrap metals to emerging economies. Revenue will increase by an average of 1.8% annually in the five-year period to $68.1 billion, according to IBISWorld industry analyst Deonta Smith. From 2011 to 2012, revenue is expected to grow 7.9%, as global economic growth gains steam.
While the Recyclable Material Wholesaling industry is quite fragmented, there are several vertically integrated steel manufacturers that buy and sell scrap metal. Over the past five years, these large players sought to own more of the supply chain and acquired scrap metal wholesalers at increasing rates as scrap metal can be used for steel production, says Smith. The pace of industry firm acquisitions peaked during the period up to the recession. Skyrocketing steel prices prompted many steel manufacturers to acquire recyclable material wholesalers to widen their margins amid high steel scrap prices, which are correlated to broader steel prices. These acquisitions led to fewer industry firms as large manufacturers sought to bring scrap metal wholesaling in-house.
The next five years will likely bode well for the industry. Strong global growth will lead to industrial production expansion, which will in turn bolster demand for scrap metal, as heavy manufacturers use recycled steel. Also, steel manufacturers will accelerate their demand of scrap metal as these players increasingly adopt electric arc furnaces (EAFs) to make steel, a process that uses scrap metal as an input (as opposed to using coal). Emerging economies will also continue demanding scrap metal to meet demand for steel in their markets, ultimately resulting in heightened scrap metal prices. As a result of these positive trends, industry revenue is expected to grow in the five years to 2017. For more information, visit IBISWorld’s Recyclable Material Wholesaling in the US industry report page.
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IBISWorld industry Report Key Topics
This industry wholesales automotive scrap, industrial scrap and other recyclable materials. The industry includes auto wreckers that dismantle motor vehicles for the purpose of wholesale scrap. It also includes establishments that break up, sort and wholesale all forms of scrap iron and steel using power processing equipment such as cranes, hydraulic shears, baling equipment and cable strippers.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
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Barriers to Entry
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