‘Tumultuous’ times for Australian scrap sector

Australia – The scrap metal recycling industry in Australia ‘has faced a tumultuous past five years’ largely because of ‘poor demand conditions’ which have adversely affected upstream activities in the sector, according to a new report by US research firm IBISWorld. It predicts that the industry in Australia will contract by around 1.5% this year and will generate revenues of around US$ 3.06 billion.

The recycling industry in Australia ‘has taken a beating’, contracting at an annualised 2.6% in the five years through 2012/13, states the report. Consumers ‘are keeping their purse strings tight’ and avoiding unnecessary purchases, with the result that demand has been lower for manufacturing industries such that the supply of scrap generated by manufacturing has been reduced.

Slowing activity levels within the construction sector have also had an impact. ‘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 report points out.

Industry consolidation and restructuring have been rampant, with only a few businesses expanding their operations whereas many others have downsized to lower costs. The consolidation trend is thought likely to continue over the next five years. ‘Profit margins are expected to improve in the long term as operators realise synergistic benefits from consolidation activities,’ remarks IBISWorld’s industry analyst Ricky Willianto.

He also forecasts that recovery in downstream markets will buttress industry revenue growth over the coming years.

For more information, visit: www.ibisworld.com