Piecing Together the Scrap Metal Industry

Piecing Together the Scrap Metal Industry
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The scrap metal industry doesn't get a lot of attention. After all, the word "scrap" implies unwanted leftovers and rusted junk. By name alone, it's not the sexiest industry.

But the facts paint a different picture: Scrap is a multi-billion dollar industry hinged about recycling and reusability. After all, everyone has scrap, and everyone wants to use scrap in this increasingly sustainable economy. In 2011 alone, it's estimated that scrap generated over $90.6 billion in economic contributions, which makes this industry as large as the forestry and fishing industries combined.

An industry of that size doesn't crop up overnight; scrap is an age-old industry steeped in traditional business practices. As seen by the financials, a thriving legacy created a vast market over time, but technological growth has been slow to catch on. Its customs remain dated, a blatant pain point among industry professionals.

"The scrap metal industry is something of a dark horse; it's definitely off mainstream radar. But it's such a sizeable industry with many opportunities, particularly in growth and availability," says Dale Turken, founder of ScrapGo, an online network that facilitates buying and selling of scrap metal.

As a buyer, ScrapGo can be more competitive than the broader market because of the volume it delivers to mills, foundries and other scrap buyers. Most sellers market one or two loads at a time, while ScrapGo markets millions of pounds each month, driving pricing incentives that further pad sellers' margins.

Turken, a scrap metal enthusiast, had no prior experience in the industry before launching ScrapGo but always held an interest in scrap. He recognized that scrap is an enormous field, and its influence feeds into a multitude of other industries. But although he's not an industry professional, he notices industry-wide practices are glaringly problematic: The size and potential are there, but the scrap industry is stunted with its lack of reach and poor integration of technology.

Scrap relies on old-school means of acquisition and an infinite pool of small players, making this massive industry fragmented and difficult to navigate. For example, if a manufacturer is producing a large quantity of aluminum waste during the manufacturing process, he may go to his local scrap dealer who then goes to a local foundry or two to ask for pricing and may even call a broker. The reach of this scrap aluminum opportunity equates to about 10 potential buyers. However, the demand for scrap metal is exponentially higher than that limited reach. For the seller, while he may be getting the best deal from his own stable of buyers, there is no way to know if he is getting the best deal available in the market today.

Traditionally, scrap metal has been a highly localized business, but Turken sees nationwide potential. With an extensive online catalog, ScrapGo opens up the buying and selling process to the masses. Buyers and sellers within the industry can now access the full market, not just a tiny sliver.

"It's an inefficient process that needed updating. ScrapGo not only presents an improved solution congruent with 21st-century technology, but we back it up with service and reliability," Turken adds.

Along with availability and efficiency, ScrapGo addresses other pain points in the industry including transparency and cost. Buying and selling scrap online can lend itself to questionable transactions, but all sellers on ScrapGo have been vetted and all materials have been verified. To maintain affordability with erratic fuel costs, ScrapGo has aligned itself with several national carriers and freight brokers to keep costs low when transporting scrap.

Scrap is an industry with a strong legacy and shows no sign of slowing down.

"Scrap metal is a sustainable industry, and the widespread desire to "go green" in recent years has made this traditionally stale industry quite appealing to us, says Turken. "At the same time, advances in technology have made it accessible."

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