Strong global growth will spur industrial production, bolstering demand for scrap metal
Los Angeles, CA (PRWEB) February 05, 2013
The Recyclable Material Wholesaling industry's performance is largely dictated by demand from the scrap metal market. According to IBISWorld industry analyst Deonta Smith, “Increasing global demand for steel supports this market, since scrap metal is used in the production of steel.” 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 skyrocket, which translated to higher revenue for industry operators. Conditions changed considerably during the recession, however, with excess supply and falling demand dragging prices down and putting the pinch on wholesalers. Still, wholesalers managed to increase revenue over the five years to 2013, selling significant quantities of scrap metals to emerging economies. IBISWorld estimates that revenue will increase at an average of 0.9% annually in the five years to 2013 to reach $73.3 billion. As global economic activity continues to ramp up, revenue is expected to grow 7.7% in 2013.
Though the Recyclable Material Wholesaling industry is relatively fragmented, there are several vertically integrated steel manufacturers that have acquired wholesaling operations over the past five years to gain more control over the supply chain. The pace of industry acquisitions peaked during the period up to the recession. Surging steel prices prompted steel manufacturers to acquire recyclable-material wholesalers to widen their margins because high steel scrap prices are positively correlated to steel prices. “These acquisitions led to fewer industry firms, as large manufacturers sought to bring scrap-metal wholesaling in-house, increasing the industry’s market share concentration,” says Smith.
The next five years will likely bode well for the industry. Strong global growth will lead to industrial production expansion, which will bolster demand for scrap metal, in turn, as heavy manufacturers use recycled steel. Also, steel manufacturers' demand for scrap metal will increase as these players increasingly adopt electric arc furnaces (EAFs) to make steel, a process that uses scrap metal as an input (instead of using coal). Emerging economies will also continue demanding scrap metal to meet demand for steel in their growing markets, ultimately pushing up scrap metal prices. As a result of these positive trends, industry revenue is expected to grow strongly in the five years to 2018. 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.
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