Throughout 2024, several macroeconomic forces, geopolitical tensions, and shifting market dynamics shaped the metals market trajectory, with notable impacts felt globally and in regions like the Middle East. Waste & Recycling magazine caught up with industry experts on the latest developments in the metals recycling market.
Sharing his insights on the scrap metal industry in the UAE, Sanjeev Garg, Managing Director, Indicaa Group FZE, said the industry is mired in various issues, including the lack of unified rules across Emirates. He batted for implementing a license or permit system, instead of export duty, as the former would be more enforceable. “Additionally, we have heard that the Federal VAT authority has halted VAT refunds for scrap exporters over the last eight months, adding another layer of complexity to an already challenging landscape,” he said.
From a broader perspective, the region's scrap surplus needs to be managed, and with little local consumption, this surplus finds its way to international markets. For the UAE, the most scrap metal export destination is the Indian subcontinent.
Throwing light on the company’s upcoming plans, he said, “Indicaa also intends to set up a scrap metal melting unit in UAE, if only the conditions are conducive. Indicaa already has melting units in South Africa and India, and is putting up two more across the world. Indicaa intends to make 1.5 million tonnes of steel by 2030.”
Scrap is a critical raw material and must be retained in the country of origin as long as there’s enough demand to consume it.
The push for green steel
As the global steel industry faces increasing pressure to transition towards greener production methods, there is a growing focus on the potential of "green steel"—steel produced with reduced carbon emissions. However, this transition poses significant challenges, particularly in regions that are heavily reliant on traditional coal-based steel production.
"Recycled steel is currently the closest thing to green steel," Garg said, adding, "But shifting large-scale steel production to hydrogen-based methods or other low-emission technologies will take time. The infrastructure isn't ready to replace coal-based furnaces overnight."
Replacing coal with alternatives like hydrogen to produce Direct Reduced Iron (DRI) for green steel is a monumental task. While some nations are investing in this technology, "it will take a long time before we see significant results," he noted. "The only immediate solution is to impose carbon taxes on polluting industries, letting them pay for their emissions through carbon credits."
Speaking about the scenario in India and China, he said, the transition to green steel is particularly challenging in countries like India and China, where coal still dominates the energy landscape. "India has committed to becoming net-zero by 2070, and China by 2050. But in reality, it’s difficult to see these countries replacing coal in the near future. Their economies rely heavily on it."
For countries like India, shifting from coal-based energy sources to renewables and nuclear power is essential, but it's a slow process. "It is doing well on renewables," he acknowledged. "But the country still needs vast amounts of electricity."
Africa’s emerging market for steel
There is growing interest in Africa as both a producer and consumer of steel. "Indicaa is the largest exporter of scrap and billets to Africa," he revealed. "We have a manufacturing unit in South Africa, exporting over 200,000 tonnes of billets annually." However, he noted that infrastructure challenges, particularly logistics, are hindering the growth of the steel industry in some regions. "Take Zimbabwe for instance—China has built a massive steel plant there, but with the nearest port 800 kilometers away, it’s not going to be easy."
Turkey and Bangladesh
Turkey, which plays a pivotal role in the global scrap steel market, continues to see strong growth. "Turkey is the world’s largest importer of scrap steel, and they effectively dictate scrap prices globally," Garg noted. "Despite their size—only 3% of global steel production—they have a massive influence on market dynamics."
In contrast, Bangladesh’s steel industry is facing significant challenges. "The political situation in Bangladesh has created uncertainty in the market," he noted. "Many steel buyers are cutting production because large projects are being delayed."
Looking at the future
While the recycling industry continues to grow, the future of the global ferrous scrap trade faces significant obstacles. "The sea-borne trade of ferrous scrap may decline by 80% by 2030,” he said, adding, “with more countries imposing restrictions on scrap exports, the global market could shrink dramatically."
Countries are increasingly prioritizing domestic recycling efforts, which could benefit local industries. "Every country, no matter how small, generates scrap," he explained. “Over time, domestic recycling industries will develop everywhere, and exporting scrap will become less important."
Garg concluded with a hopeful outlook on the future of the recycling industry. "If governments genuinely restrict waste exports and promote the use of recycled materials domestically, we could see a huge boom in recycling innovation," he said. "It’s not about recycling just to send it abroad. The focus should be on using recycled materials to create valuable products within the country."
Sanjeev Phadke, Managing Director, Metaal Europe International spoke about the evolving dynamics of the recycling sector in the Middle East, particularly the UAE and Saudi Arabia.
A significant issue he highlighted was the impact of unorganised and non-compliant scrap collectors who, due to lack of education or willful ignorance, fail to follow rules and regulations. This creates tension for more organised players who are keen on compliance. "We try to do things systematically, with investment in machinery and equipment, but it’s difficult when our vendors do not respect the same standards," Phadke explained.
One solution Phadke proposed was a reverse charge mechanism through the Federal Tax Authority (FTA), adding that organisations such as the Chamber of Commerce and Bureau of Middle East Recycling have made representations to the authorities in hopes of addressing the issue.
On a more positive note, he highlighted the growing demand for non-ferrous metals, particularly copper and aluminium, in the Middle East. He explained that the region has shifted from being an exporter of recyclable metals to becoming a significant consumer. "Some established companies have started using recyclable material as feedstock, and a lot of new foundries have come up to utilise the available recyclable material," he shared.
Phadke also emphasised the environmental benefits of metal recycling, saying, "Recycling of metals generates a lot less carbon compared to the traditional primary route of production," which aligns with the Middle East governments' focus on sustainability and carbon reduction. This shift has made the region a growing importer of clean, recyclable materials, especially aluminum and copper.
Speaking on the rapid expansion of recycling facilities, he noted, "The rate of growth of recycling facilities is much higher than the rate of growth of recyclable material generation," which means the industry is increasingly looking at imports to meet demand.
In terms of industry-specific trends, the MD pointed out the rise of secondary alloy producers in the UAE. "From being just two or three secondary aluminum alloy producers five or seven years ago, today we have 11 active secondary alloy producers within the UAE," he said. This growth has driven up demand for aluminum and copper scraps, leading to more imports to fulfill the local market's needs.
Phadke also touched on the broader global trade scenario, which he described as moving towards "de-globalisation." He explained that while global leaders might not openly discuss it, "It is clear from the policies being implemented in different parts of the world that we are going back to de-globalization." He attributed this trend to political and economic factors, including trade restrictions and anti-dumping rules meant to protect local industries.
In addition, he pointed out challenges within the shipping industry, particularly following the COVID-19 pandemic. "The shipping industry is not being trade-friendly," he remarked, noting that increased transportation costs are passed down to consumers, further complicating global trade.
Sharing insights from the recently concluded London Metal Exchange (LME) Week, Natalie Scott-Gray, Senior Metals Analyst, EMEA & Asia, StoneX, said that it began with optimistic indicators for the non-ferrous sector. Chinese stimulus efforts, combined with the first US rate cut in 2024, sparked bullish sentiment. Lower inflation forecasts and expectations of a cyclical demand recovery set the tone for a potentially strong market rebound. However, as the week unfolded, market volatility began to surface, she said.
Geopolitical tensions, especially in regions like the Middle East, are expected to play a crucial role in shaping the non-ferrous metals market. The ongoing conflict between Israel and Hamas, as well as unrest in the Red Sea involving the Houthis, introduce new uncertainties. Over 2024, with 50 general elections globally and the possibility of further geopolitical flare-ups, the market could face inflationary pressures and higher interest rates for longer durations. These factors could dampen the recovery momentum, particularly in economies already grappling with weak demand, Scott-Gray noted.
Outlook for 2025
Despite the current turbulence, there is optimism for a recovery in 2025. One of the main catalysts for this is the expected fall in interest rates in the West, which should encourage a cyclical demand recovery. In China, the government has made it clear that it will implement various stimulus and policy measures aimed at boosting growth within the country, tackling banks' reluctance to lend, supporting stock markets, increasing household consumption and absorbing excess housing inventory, she observed.
However, while these efforts indicate a commitment to rejuvenating the economy, China faces a major challenge in restoring confidence, which currently sits at record lows. The simultaneous implementation of drastic monetary and fiscal policies, such as the Reserve Requirement Ratio (RRR) cut and the one-year loan prime rate cut, underscores the seriousness of the situation, she said.
Challenges on the horizon
Nevertheless, the non-ferrous metals market faces a host of risks. She pointed to the potential for a recession in the US as a critical concern. Historically, stock market performance post-rate cuts rises 14% in non-recession periods but falls by 4% during recessions, which would have a direct impact on commodity demand, she pointed out.
The excess housing inventory in China, particularly in lower-tier cities, could take years to absorb, potentially limiting consumer confidence and demand for metals. Changes in global political leadership, including in the U.S, especially regarding tariffs and trade policies, add further uncertainty.
She further added that the ongoing tensions in the Middle East, Russia-Ukraine conflict, and the delicate China-Taiwan situation could lead to two potential outcomes: Risk Channel: Financial markets often overestimate the impact of supply disruptions, leading to higher prices (as seen during the Russia-Ukraine conflict in Q1 2022, which resulted in record highs for copper, nickel, and aluminium). Economic Activity Channel: Prolonged geopolitical strife impacts global economic activity, slowing investment and demand, which can exert downward pressure on prices. The economic activity channel tends to have a more sustained impact, as evidenced by the base metals market during the US-China trade war in 2019 and the weak performance of 2022 during the early stages of the Russia-Ukraine conflict.
Regional demand for non-ferrous metals
In terms of regional demand, emerging markets are expected to lead the growth charge, with India standing out as the largest growth market. India's commitment to infrastructure development, renewable energy expansion, and industrial modernisation will drive significant demand for aluminium, copper, and zinc.
Western economies are also anticipated to return to demand growth as interest rates begin to fall, stimulating investment in infrastructure and green technologies. However, the outlook for China remains uncertain due to its property market woes and broader economic concerns.