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Piyush Soni .

How to start a metal Scrap business in India?🤔

Metal scrap business is one of the highest profit-generating businesses in India that require very modest investment. 🤓

The world of recycling and salvage depends on scrap metal businesses to locate, gather, and deliver various metals for further use and consumption.

By operating a scrap metal business, a business owner can make an impact on the environment by reducing landfills and maybe turn a profit. 🔥

For some, the excitement of finding hidden treasures fuels them while others like the idea of making a profit from garbage-bound material.

Being a Chemical Engineer myself, I am just curious to learn, how can one start this business in India? What are the future aspects of this business?

What are the various steps involved in setting up this business?

Originally Posted Here
26 Comments

Piyush Sarawagi

It's a highly cartel driven, quite rough and difficult business to get in with huge entry barriers. Also, the credit lines are way too long. Most large players give interest free loans to smaller ones and they become loyal to them. From labours who segregate different qualities and transporters who gives trucks- all are generally aligned to one or two large players in every market/ locality. Speaking from first hand experience- not to demotivate someone. Might be completely wrong:)

Piyush Soni

Have you been in this business before?

Piyush Sarawagi

yes

Piyush Soni

Oh I see. That means the whole Monopoly system works here? as you mentioned large companies giving loans to smaller ones

Piyush Sarawagi

In my experience - yes

Somya Jain

Piyush Sarawagi even you changed my opinion about the business
But how much is the investment

Piyush Sarawagi

Somya Jain that completely depends upon the volume you want to play with. You will need to pay in advance to the scrap collectors and sell on credit to the foundaries.

Shabana Khanam

To be honest any scrap business is quite profitable I've seen people go rags to riches I don't know the secret though ...

Piyush Soni

Yeah I was discussing this with a friend of mine. From there I was like, can this business be really established with high profit margins

Shabana Khanam

it is got greater margin .. like someone mentioned it's pretty grim and grey not to forget rough too

Shreyas Bhave

It is a very relationship driven business and almost 60% black money (cash) economy business

Businesses which sell scrap generally take 60% cash and the dealers of scrap also sell to foundries and end users of scrap in cash

It is a risky business but can have very good opportunities for exceptional profits due to market fluctuations.

Also because of the cash nature, it is dependent on long relationships between existing dealers and their long time sources and people do not trust new people so easily for the same. Also source of scrap metals prefer the dealer to be of the same area as them.

Reuben Crasto

Very profitable business and since your indian you should definitely talk to mafia friends and politician to get best info

Piyush Soni

Haha, almost every core businesses have to go through that part!

Reuben Crasto

no not every business normal shops just require government papers

Srikanth Soni

I have a slightly different viewpoint from the others here.

Background: I have worked in the past as a manager with Waste Ventures India, an urban waste management startup disrupting the waste management scene in india. I was leading their B2B waste management business unit for Hyderabad city. I can proudly boast of having turned around the unit from a loss making one into an operationally profitable one within 3 short months by means of various interventions at the Operations level.

We would deal with almost every type of industrial scrap. Our USP was that "we don't say no for picking up any type of scrap". Metal was a part of that. A big part. We worked with some of the largest manufacturers and rarely encountered cartels/bribes/black money. Everything was accounted for, taxed, billed, transacted online.

What I do agree with is that there is good money to be made. Other industries are waiting for entrepreneurs to disrupt this industry. The only concern is the long, really long and tiring work hours one has to deal with. Not to forget - interact with ground workers at one end and general managers at the other end of the spectrum. Quite a task that is. (The long work hours is one of the reason I couldn't continue working there - despite having flexible work policies, some industry leading best practices, good salary, etc.)

On the other side, I also have a cousin, who invested INR 75L over a period of 3 years running scrap metal business and came out with a big "0" at the end of third year. His was highly unorganised, traditional business.

Hope this gives you a perspective.

Piyush Soni

Yeah brother, thanks for the insights! One thing I want to ask here is, what are the things that can go wrong in this business? I have understood the management part is tough here, apart from this is any other thing that is crucial here?

Srikanth Soni

Regarding your last point: how does one start this business:
1. First decide whether you want to go B2B or B2C. Your next steps will depend on this.
2. B2C may get you better margins per unit but lower volumes to begin with. The cost of purchase willbe higher unless you pool collections.
2. If it's B2B, you'll have higher volumes but very competitive prices. Efficiencies in handling, transportation will help.
3. For B2C: you could possibly begin by targeting small housing societies. Announce a particular day for collection and show up on that day at the society. Pick up the scrap and pay the money. Dump it at your scrap yard. Repeat. Then Get in touch with a local bulk collector who does larger volumes and he sends it to recycler (you may not be able to send to recycler directly due to lower volumes initially). Once you start collecting from many more societies and Apartments, you'll have volumes. Now reach out to the recycler and commit a monthly volume. Now work reverse to achieve that target else you may not get a good pricing from the recycler. They may even reject future consignments.
3. For B2B, try locking the "scrap generators" into yearly contracts. Pick up scrap at regular frequency, keep storing until you think you'll make good profit or if you see prices dipping. Will require money in Bank to purchase all the scrap. It's a cash and carry business. No credit from seller or to the buyer. Make service as a differentiator. Be professional, businesses are keen to work with professional scrap companies even if they get few percentage points lower price for their scrap.

Whether B2B or B2C, once you start collecting volumes, the recyclers will also be interested in working with you.
Another noteworthy thing is that recyclers love scrap that is well sorted and has lesser impurities.
I'll give you an example:
For our waste carton recycling, we started with 5% wastage in the scrap material. With focused efforts, we bought down that wastage to 0.5%. That's a whopping 90% reduction in wastage. That's 4.5% extra margin per every kg of carton recycled. That's huge when you consider tons of material being recycled. It can be the difference between profit and loss, survival and death.
Also, make sure you store the material well. At Waste Ventures, we used to engage with pest control agencies to reduce pest at our warehouse. Ever heard of a waste management company doing that? Well, this one bit helped us reduce wastage dramatically, plus a healthy work environment.


Once you spend considerable time doing all the above manually, it's time to introduce technology for enabling all of this. Operations is the key to being successful in this business. No piece of technology can help unless your operations are addressed.

Happy to discuss more based on any questions you may have.

Things that can go wrong:
Lack of knowledge of materials, where they are sourced from, what are the supply chains, what are industry regulations, who are the producers of original raw materials, etc. Are some of the main reasons why you'll mess up this business.
I'll give you few examples:
1. Did you know, climatic conditions affect the prices of raw material?
2. Did you know oil prices affect some of the metal prices?
3. Is there any large manufacturer investing billions to setup new plants? That means demand for scrap will increase.
4. Is the govt imposing anti dumping duties on scrap imports? That means local scrap prices will improve.
5. Is the govt enforcing strict pollution control norms? That means recycling industries will face challenges.
6. Is there a specific material that is hard to work with and people are trying to find an alternative for? Eventually the prices may fall for this type of scrap because of lesser demand.

In a nutshell: knowing when scrap prices will increase or decrease will make or break your business. Keep an eye on the prices, Everyday. It should be a ritual to track international and domestic prices, and factors affecting them.

Dilip Patel

Being a Weighing scale manufacturer since 1995. I am very close to these scrap business players,
Collection of any kind of scrap from public are with out bill business,
To handle and buy that
Scrap, you have to interest free finance to small scrap collecting person.
Metal scalp always come in to compound forms, mean steel copper ,aluminium brass,bid . Casting, stainless steel. All are in mix in scrap , it’s difficult to value that scrap in mix form,
Major trade in india of recycling of metal is black money business and billing adjustment practice,

Many time we purchase imported stainless steel for scale part making, but
Trader give us recycle steel bill.
Metal scrap business in india mejor control and operated by Marwari people,they do business in group.and never entertain new comer

Piyush Soni

Yeah definately agree with your last line!

Kamlesh P

Dilip Patel I too have small metal bussines... Ur right most of market covered by marwardi ( specially sanchore region).....

Moulik Jain

Dilip Patel many Marwari people do metal business. But ever entertain new comer is wrong statement. As I closely observed this business from last 28 years.

Dilip Patel

Moulik Jain Due to black money transfer and transaction,
Major dealing in close group, with solid reference they are open gate, textile steel
Are specific fields for marwari people, and they are right on their way

Dilip Patel

Door to door scrap collection agains fmcg products is the way to collect metal scrap from house

Punit Gandhi

I am not aware of a lot of details about business. But a colleague of mine has been working on the developing a portal for chennai municipal corporation. Check it out, if you would like I can connect you with him.
https://www.madraswasteexchange.com/#/

Kartik Dudhela

I belong to Kansara community which is known as ‘Thatheras’, we inherited copper (and alloys) metal trading and production.

My family has been engaged into non-ferrous metal scrap procurement / trading and production since last 6 generations. We mainly produce industrial brass & copper sheet, Kansa (Bronze dinnerwares) and Brass wires and chain. Here, I am referring only to my industry which is copper and it's alloys.

I agree with most of the points mentioned above, I will try to add few positive and negative points combined.

- Metal scrap trading is quite a capital intensive. because of high pricing per kg! 20-25 lakh se kuchh nahi hota!

- No credit from seller to buyer. Even if you get any, they will entertain 1-2 transaction, then closed if you can't buy certain amount of material consistently with good payment terms.

-- This works both ways, if you can't supply scrap to buyer (producer / recycler) regularly they will not work with you further. They always look for large supplier with quantities.

- Without connections, nobody is going to entertain you, even if you have better rates.

- Handling ground level workers / labours is quite stressful.

- Cheating / fraud, a lot. Every business has risk factors, but cheating and fraud is higher in this industry. In terms of assured quality, weight malpractice.

- Practical knowledge of inspection of scrap at seller's yard / warehouse. Understanding the nature of scrap, its (re)usability, composition and which industry it fits for is the most important thing in scrap business.

Example: couple of times we have bought large transformer copper lugs in large quantities which had Silver plating for better conductivity. Traders thought it is an aluminium plating and sold it on even lower rates they should be.

- Less knowledge of metal index LME (London Metal Exchange) which references the metal rates globally to understand upward and downward trend for hedging- It doesn't matter if you play at a small level. Though it will affect your profit. If you don’t keep proper watch on this index, you won’t only lose profit, will lose capital also.

- Many Government and private company auctions take place but SETTING ruins everything.

- Most of the traders source and search such scrap which is right and useful to their regular buyers (small or large metal producers) as per their plant, furnace types and types of product they make. Various grades and types make it more complex to rely on newcomers as their lack of knowledge will destroy their furnace, entire lot of melted 2-3 (minimum) tonnes of material.
Also, some residues of impurities will damage next couple of batches as well.

- Almost all the traders end up being agent of large recyclers which is one of the biggest hurdle.

- Production houses always wants pure and cleaned material. They will agree on terms but consistency in terms of quality and quantity can only lead to good business.

- Metal scrap sells quickly because of endless demand

Satyajit Saha

I tried exploring this business. Researched the insights in the city i was livin. There were a lot of people who owned guns involved. Switched to something else

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