Scrap metal businesses have a significant market because recycled and scrap metal is cheaper than pure metals, therefore a range of businesses can benefit from buying these raw materials at a cheaper price. If you’re thinking of starting a scrap metal businesses, experience and knowledge are essential as you’ll be involved in a lot of bargaining – you’ll need to ensure the price is fair when both buying and selling product.
Accumulating raw materials
To run a scrap metal yard, you’ll need the raw materials to sell. Scrap metal comes in a range of different ways so you need to know exactly what’s valuable and what’s not. Building supplies, discarded car parts – these are just two of the potential sources you should be looking into. Some will need to be bought, some will be given for free, and some will need to be salvaged.
Creating a holding area
You’ll also need premises; bear in mind that good access is essential as many people will come in larger vehicles, particularly if they’re looking to buy in bulk. If you want to allow potential customers to come and browse what you have, the holding area will need to be large, and easily negotiable. Some scrap yards do not allow browsing, but those that do often also ask customers to extract the materials themselves (using their own tools, most of the time, and having waived liability for any injuries sustained).
To make your material more attractive to prospective buyers you may want to segregate high-value metal into piles – these piles will be made of the same type of metal, or from the same source, or some other important characteristic. Buyers will then bid on these piles, with the highest bidder ‘winning’ the pile.
To increase the number of revenue streams, some scrap metal businesses sell high-value items to buyers and then the rest to smelting companies – this makes lower-quality metal lucrative and increases the amount of material that can be collected.
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Setting the price
Experience and knowledge is key to running a successful scrap metal business because the price is so important – you need to ensure you make a profit while also staying ahead of competitors and providing a ‘go-to’ service for local businesses. Because of this, knowing exactly what scrap metals are worth is key. Don’t forget that scrap metal is always sold by weight, and never by piece or type.
Holding area safety/security
These two are very important – your holding area must be safe for employees and customers. This may mean ensuring metals are not stacked too high, and that nothing sharp is balanced in a precarious manner. Handle all items with gloves and other protective gear and know what to do in the event of an emergency e.g. you discover radioactive material in your scrap.
Because of the high potential for injury, make sure you are fully insured for all eventualities and check your underwriting carefully to see what is and what isn’t covered. Make sure you comply with all rules so you don’t invalidate the policy.
Your holding area also needs to be secure because scrap metal is attractive to thieves, due to its high-value and lack of owner-identifying characteristics. Security lightning and a lockable perimeter will often be necessary.
Insurance and compliance
You’ll need employer’s liability insurance when hiring staff, and you may wish to approach a specialist insurer with experience in your industry due to the higher-risk of staff injury that comes with the job.
Public liability insurance and professional indemnity insurance are also essential, and again, you may want to approach a specialist insurer.
Scrap metal yard are subject to legislation outlined in the Scrap Metal Dealers Act 1964
Start-up costs can vary depending on the size of the operation and the location. The biggest costs will be renting or buying land, accumulating your first ‘load’ of scrap metal and securing your premises, as well as buying vehicle(s) to make collection easier. By starting smaller, you can reduce the amount of capital you need, and then grow when you are able.
Audit trail & stolen merchandise
As of January 2012 the Government is considering bringing in legislation that would require a full audit trail for all metals sold, and fines for scrap metal yards that handle stolen goods. This is to help prevent the increasing number of metal thefts from high-value targets such as railway lines. We will update this article as the issue progresses.
There’s a huge amount of training available to you, most of which are designed to help you run a safer and more secure scrap metal business.
Courses are run by the British Metals Recycling Association
(BMRA) in association with Metaskill, and include:
Health and Safety Passport – focuses on improving knowledge of health and safety matters in the workplace
Radiation Safety Awareness Training – this focuses on detecting and dealing with radioactive materials, which have been found in material intended for scrap metal businesses
The Waste Management Industry Training and Advisory Board
(WAMITAB) also provide a range of qualifications, including NVQs in broad topics such as Waste Management Operations, Waste Management Supervision and Cleaning & Support Services.
If you’re driving large vehicle to collect scrap metals and machinery, you’ll need to hold the Certificate of Professional Competence