The need to decarbonize the metals industry, surging metals demand due to the energy transition and the effect of geopolitics on an already-strained supply picture, are strengthening the business case for recycling activities globally. From commodity traders to industrial players, this is also triggering a rethink of companies’ strategies to diversify their business across the value chain and capture the benefits of this burgeoning segment. But the market is still so niche that finding the right talent to spearhead and integrate recycling businesses can be a struggle.
Growth potential
The ferrous metals segment held the largest market share of the recycling market in 2020, or around 58.5%, according to market research company Brainy Insights. Iron and steel scraps are currently the world’s most recycled ferrous metals.
Soaring demand for metals means the growth potential of the recycling segment is enormous. The supply of primary metals has been struggling to keep pace with demand in recent years, a trend that is certainly aggravated by the impact of Russia’s invasion of Ukraine on commodity supply chains. As a result, prices have been on the rise, building a more compelling case for recycling metals. The global recycling market is expected to more than double between 2020 and 2028, from $40.4bn to $88.18 bn over the period, and at a CAGR of 10.72%, according to Brainy Insights.
Metal demand has been driven by growing population as well as the urbanization and industrialization of emerging countries like India, Saudi Arabia and the UAE. The Asia Pacific region already accounted for the largest market for metal recycling in 2020.
The energy transition is also a major driver, with key metals such as aluminium playing a significant role in the development of electric vehicles, electric equipment and renewables. Beyond this, aluminium is also critical for other applications in industries which manufacture consumer goods, from the packaging sector to the automotive industry. The International Aluminium Institute (IAI) expects that global demand for aluminium will rise by more than 80% by 2050, with recycled metals representing up to 60% of global supply by 2050.
In addition, the production of recycled metals is much less polluting. For steel production for instance, using scrap metal instead of ore, can reduce emissions and avoid environmental damage, such as acidification of waters. For aluminium, it is estimated that the rise in primary aluminium production to meet future demand would cause a rise in sectoral emissions of 45%. More than 90% of aluminium emissions are estimated to come from primary production. However, secondary, or recycled aluminium consumes just 5% of the energy required for primary production.
Circular Business Model
In the face of mounting ESG-pressure, a growing number of companies including industrial players are committing to raise the share of recycled content in their products. This is supporting the case for a more circular business model and leading to a more competitive environment for access to scrap metals.
While some major traders have been moving downstream to make the most of opportunities offered by the secondary metals market, end-user segments and industrials are also developing their recycling activities, be it as sellers or buyers. These include several industrial sectors, to name a few: building & construction, automotive, equipment manufacturing, shipbuilding, packaging, consumer appliances, and others. Notably, the significant metal waste produced by the building & construction segment due to increased demolition rates, is anticipated to boost its demand. For aluminium, the packaging, technology, construction and transport sectors represent key supply sources for aluminium.
Major metals players including ArcelorMittal, Aurubis, Nucor Corporation have been investing in the global recycling market. This has translated in key players adopting new technology, product innovations, mergers & acquisitions and joint ventures to optimize their market position. For instance, in May 2019, as part of its multi-metal and recycling strategy, Aurubis AG took over Belgian-Spanish Metallo Group. The acquisition was designed to support its strategy, particularly for metals such as copper, nickel, tin, zinc, and lead.
As another example, international conglomerate GFG Alliance, which is historically built on metals and mining trading businesses, expanded over time to service directly a wider range of industrial customers in the automotive, aerospace, defence and construction sectors through subsidiaries like Liberty.
Diverse Talent Needs
Increased demand for secondary or recycled metals has created a growing need for talent able to handle commercial and procurement activities, primarily to source scrap material. Talent with experience in running scrap recycling plants is also in high demand.
The development of a circular business model is triggering a variety of talent needs. But the sector remains so niche that the talent pool has yet to achieve critical mass, said Rina Kaciu, Senior Associate at HC Group’s Metals & Mining practice. “Demand is growing rapidly. But the market is so small that very few individuals can fit the bill. The talent pool is so limited that when one individual becomes available, that’s an advantage in itself,” Kaciu said.
The biggest need currently is for individuals who can source scrap metals like aluminium, Kaciu said, citing a growing number of companies, including trading houses, setting up low-carbon aluminium units. “A lot of our clients who are investing in low-carbon facilities, recycling plants or aluminium smelters are on the look-out for aluminium traders who can source low-carbon aluminium, or who can trade aluminium scrap,” she added.
Against this scarcity of talent, there are some specific skills and advantages that employers are prioritizing on. Notably, the trading network and connections that individuals can bring to a company has made a real difference, said Kaciu. “With the momentum for low-carbon metals growing so fast, very few people know how or where to source low-carbon aluminium from. Applicants who can bring a network of contacts to trade with are attractive to clients,” she added.
This talent trend is expected to persist for some time to come as more companies continue to invest into various parts of the metals recycling segment. In February 2022, in the United Arab Emirates (UAE), Emirates Global Aluminium announced plans to build a 150,000 t/y facility designed to recycle aluminium, the company’s first and set to be the largest in the country. The facility will process post-consumer aluminium scrap like window frames, as well as pre-consumer aluminium scrap from extrusion production.
Also in February, in India, vehicle manufacturer Daimler India Commercial Vehicles (DICV), a subsidiary of wholly-owned subsidiary of Daimler Truck, the Germany-based vehicle manufacturer, said it had partnered with CERO, a scrappage and steel recycling plant owned by Mahindra MSTC recycling. Through the partnership, DICV will be able to offer its customers hassle-free service to the owners of its vehicles to help them scrap their end-of-life commercial vehicles. – FS
For queries related to HC Group’s activities and talent insights into metals recycling or industrial customers, please contact:
Rina Kaciu, Senior Associate at HC Group’s Metals & Mining practice in EMEA.
Scott Reid, Portfolio Director at HC Group’s Metals & Mining practice in EMEA and North America.
Premesha McDonald, Portfolio Director at HC Group’s Metals & Mining practice in Asia Pacific.
Andrew Watson, Portfolio Director at HC Group in South America.