The industry has struggled to remain profitable
Melbourne, Australia (PRWEB) March 18, 2013
The Scrap Metal Recycling industry has faced a tumultuous past five years. Industry revenue has taken a beating, contracting at an annualised 2.6% in the five years through 2012-13. Upstream activities in the industry have been adversely affected by poor demand conditions. Consumers are keeping their purse strings tight, staying away from unnecessary purchases. As a result, demand for manufacturing industries has gone down, lowering the supply of scrap metal generated from manufacturing activities. According to IBISWorld industry analyst Ricky Willianto, “a low consumption level has also meant a low waste volume, leading to a low supply of scrap metals”.
Poor macroeconomic conditions have been detrimental to the industry's downstream markets, hindering growth in demand for industry products. Slowing activities in the construction and manufacturing sectors have led to decreased demand for metal products over the past five years. Nevertheless, industry exports have been strong, mainly riding on the back of strong construction activities in developing countries such as China, Thailand and Vietnam. The industry is still estimated to contract by about 1.5% in 2012-13, to generate revenue of $3.06 billion.
Industry profit margins have declined in the past five years due to a volatile metal market and an undersupply of scrap metal. As a result, consolidation and restructuring activities have been rampant in the industry. A few industry operators are expanding operations, aiming to become more vertically integrated. Other players have downsized operations to lower costs.
Recent consolidation activities in the Scrap Metal Recycling industry are expected to increase market concentration over the next five years. Large operators will continue growing market shares and geographical presence to enhance procurement efficiencies and lower transportation costs. This is expected to provide the large players with a competitive edge in the face of growing demand for scrap metal. The industry’s three largest companies are Sims Metal Management Limited, Arrium Limited and CMA Corporation Limited.
“Profit margins are expected to improve in the long term as operators realise synergistic benefits from consolidation activities”, says Willianto. Recovery of downstream markets will also buttress industry revenue growth over the next few years.
For more information, visit IBISWorld’s Scrap Metal Recycling report in Australia industry page.
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IBISWorld Industry Report Key Topics
Firms in this industry are engaged in the secondary recovery of recycled scrap metal. Recovery involves the manufacture of scrap metal into new usable material. Commonly recycled metals include steel and titanium.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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