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This ship sailed. Its generally accepted that e-scrap processor's margins are 15% or less. Its not just the cost to access/buy the materials that keeps margins

by rrggrr 8y ago

This ship sailed. Its generally accepted that e-scrap processor's margins are 15% or less. Its not just the cost to access/buy the materials that keeps margins low. The CAPEX costs are enormous, there are large operating costs, and regulatory compliance is also very expensive. Further complicating matters is government flip-flopping on mandated electronic scrap collection regulations that make it tough for business to predict future returns on investment. Add to that the volatility of the commodities markets and its no easy task to make a profit these days in electronic scrap. Nobody is getting rich of e-scrap that doesn't already have a foot or other appendage in the game.

gascan 8y ago
Isn't 15% a pretty good margin? Restaurants & retail make low single digit margins.
- rrggrr 8y ago
  On a risk adjusted basis, no. You're buying the raw material assuming aluminum heat sinks will be .67/lb, only to discover that by the time you've liberated the Al from the stream the price has dropped to .40/lb. That just happened. Or, you've invested $30m - $100m in an Ontario e-scrap plant assuming the CADGOV won't reverse its e-scrap policy. Then it does essentially that and the market you thought you had has changed dramatically. That happened.
  - 21 8y ago
    > assuming aluminum heat sinks will be .67/lb, only to discover that by the time you've liberated the Al from the stream the price has dropped to .40/lb Maybe you can use a financial hedging contract to lock in the price of alu?
    - recycledmatt 8y ago
      Typically the volumes are relatively small, which makes it’s expensive to hedge. It’s a penny game. If you are making a 35% spread on your buy/sell the one time inventory depreciation will definitely hurt, but your spread and net pennies per pound has also gone down substantially as well.
ocdtrekkie 8y ago
I suspect that this is an industry that will become more profitable though, not less, over time. Some materials will become harder to naturally mine over time, as we use it faster than it's created, and hence, the value of those materials will rise. I would guess that some day, mining materials in a garbage dump would be more profitable than mining them from the ground.

by rrggrr 8y ago

gascan 8y ago

Isn't 15% a pretty good margin? Restaurants & retail make low single digit margins.

rrggrr 8y ago
On a risk adjusted basis, no. You're buying the raw material assuming aluminum heat sinks will be .67/lb, only to discover that by the time you've liberated the Al from the stream the price has dropped to .40/lb. That just happened. Or, you've invested $30m - $100m in an Ontario e-scrap plant assuming the CADGOV won't reverse its e-scrap policy. Then it does essentially that and the market you thought you had has changed dramatically. That happened.
- 21 8y ago
  > assuming aluminum heat sinks will be .67/lb, only to discover that by the time you've liberated the Al from the stream the price has dropped to .40/lb Maybe you can use a financial hedging contract to lock in the price of alu?
  - recycledmatt 8y ago
    Typically the volumes are relatively small, which makes it’s expensive to hedge. It’s a penny game. If you are making a 35% spread on your buy/sell the one time inventory depreciation will definitely hurt, but your spread and net pennies per pound has also gone down substantially as well.

ocdtrekkie 8y ago

I suspect that this is an industry that will become more profitable though, not less, over time. Some materials will become harder to naturally mine over time, as we use it faster than it's created, and hence, the value of those materials will rise. I would guess that some day, mining materials in a garbage dump would be more profitable than mining them from the ground.