Scrap metal: Steel yourself for change

Posted on 5 Dec 2012 by The Manufacturer

Jane Gray talks to Nicola Guest, marketing manager at scrap merchant Alchemy Metals about recent changes in scrap dealing regulation and the vast opportunities for manufacturers to reap more value from their scrap.

The UK scrap metal processing industry is officially worth around £5 billion per year. But in fact, this is just the tip of the iceberg when it comes to the true value in metal scrap that has been used to change hands without trace.

Bad practice is consistent in the sector, both from unregistered and registered dealers and is made easy for those so inclined by out of date legislation and cash transactions.

Nicola Guest, marketing manager at Alchemy Metals, a fully registered scrap metal merchant based in Hertfordshire, says that cash payments are generally agreed to have accounted for £1 billion per year of the transactions passing through many scrap metal merchants – but no longer.

As of December 3 paying cash for scrap metal is illegal. “Twenty per cent of business will change because of trading difficulties due to the enforcement of traceability and accountability,” says Ms Guest and, she asserts, “it is about time”.

In recent years Alchemy Metals has become a vocal campaigner for alterations to the 1964 Scrap Metal Dealers’ Act which, it claims, fuels the laundering of scrap metal and exploits the industry’s customers.

Different grades of aluminium have widely varying scrap values. Image courtesy of NDosborn

Last month Alchemy played host to Damian Green, Policing and Criminal Justice Minister, to lobby and help raise awareness about malpractice in and around scrap metal trading. And this is just the latest in a long string of television and radio broadcasts, which Alchemy has participated in over the last 12 months. The Minister commented: “People who deal in stolen metal are criminals, pure and simple. That is why we’re putting a stop to cash payments and imposing heavier fines on anyone who breaks the law.” But new laws must be supported by effective enforcement admitted Mr Green before commending the achievements that police have already made in cracking down on metal thieves and fraudsters. “Through the work of the National Metal Theft Taskforce and the partnership work of Operation Tornado we are now seeing significant reductions in metal crime.”

It is activism from Alchemy Metals and like minded parties which has brought on a full review of the 1964 Act and in November the new Scrap Metal Dealers Bill had its third reading in the House of Commons. The Bill entered the Lords on November 30 with Baroness Browning taking it through the House on behalf of Richard Ottaway, MP. It is hoped that all final stages necessary for the Bill to pass into law will be completed by February 2013.

New Scrap Metal Dealers Bill

The new bill will:

  • Introduce a ban on cash payments for scrap metal
  • Oblige scrap metal dealers to verify photographic ID of sellers at point of sale and to record transaction details, retaining records for two years
  • Oblige all scrap metal dealers to gain a license from their local authority. This will have to be renewed every three years
  • Give local authorities the power to refuse and revoke licenses
  • In partnership with the police, local authorities will receive greater powers to act against unlicensed metal trade by using court orders to close premises down
  • Punitive and unlimited fines may be imposed in cases of persistent unlicensed metal trade or where other illegal activities are proven
  • Make available a public register of all licensed scrap metal dealers

A turning point

Alchemy Metals believes the new Bill and the banning of cash payments, which has already been implemented to be major steps forward in regulation of the scrap metal industry – though it warns it is only the start of a journey.

With the introduction of mandatory electronic payments for scrap will come the ability to more easily audit and keep records of payments. Other revisions to the 1964 Scrap Metal Dealers Act will increase police powers to close down unscrupulous merchants, both registered and unregistered.

Guest welcomes this warmly. “Scrap metal needs a clear audit trail if we are to crack down on metal theft,” she says. “Metal thieves are brazen at the moment. Just last week a customer of ours – an aerospace manufacturer – had an individual with a lorry turn up at the gate, claiming to be their metal merchant arriving to collect their scrap. Our customer then proceeded to take the individual through their extremely high security works to the scrap,” exclaims Guest.

“Fortunately for them somebody realised in time that the con artist was not their merchant and he was escorted off site. But others are not so lucky. This sort of thing happens all of the time.”

Indeed other examples of fraudulent activity among scrap merchants are even more underhand – even including examples of manufacturers being scammed out of revenue from their scrap by trusted business partners over the course of decades. Guest gives the example of a manufacturer who found that, over twenty years, their metal merchant had been inventing weights for the scrap they sold him. The merchant claimed to be using lorry scales to measure the amount of scrap in each skip load – but it was finally discovered that the lorry did not posses any scales.

Scrap carbide has a value of £12-£17 per kilo.

“Metal needs a clear audit trail if we are to crack down on metal theft” Nicola Guest, Marketing Manager, Alchemy Metals

Over 20 years the manufacturer estimates that hundreds of thousands of pounds were lost to the fraudulent dealer. The company is now conducting an internal investigation into how the scam was able to carry on for so long. There are suspicions that staff were paid off to turn a blind eye to the activity.

Alchemy have uncovered many such occurrences and stories like these show just how badly the UK is in need of better regulation when it comes to scrap dealing. But Guest says the authorities must show a firm hand in applying new powers if they are to instil confidence in commercial bodies to report metal theft and fraud.

“It is officially estimated that the UK loses around £1 billion a year through metal theft,” says Guest. “But we believe the real figure may be a lot higher as many thefts still go unreported.”

Guest asserts this is due to despondency and a lack of confidence in police ability to bring the perpetrators to justice. “Some manufacturers also fear that by reporting a theft they will only publicise themselves as a target,” continues Guest.

The new Scrap Metal Dealers Bill ticks all the theoretical boxes in laying out its tactics for regaining confidence and truly addressing criminal activity in the scrap metal industry. With rigorous implementation Guest says that manufacturers should see greater opportunity to transfer their scrap into value on their bottom lines while respectable merchants will gain a greater share of legitimate trade, boosting the scrap industry’s recorded contribution to GDP.