Freefalling ferrous scrap prices have prompted a fresh call for Whitehall to remove VAT from some categories of secondary raw materials.
A combination of China’s economic slowdown and the devaluation of the Russian rouble have changed the dynamics of ferrous metal recycling in recent months.
MRW’s latest sector report indicates that some operators paying as little as £5 per tonne for the 5C light iron grade, with the availability of cheap imported primary raw materials largely blamed for the situation.
The October Ferrous Report said operators had dropped prices by an average £15 per tonne across all categories in September, and were predicting falls of £20 this month.
Ian Hetherington, director general of the British Metals Recycling Association (BMRA), said that Government action to lessen the VAT burden on suppliers of scrap metal would go some way to shoring up the industry against cheap imports.
“There needs to be a pull-mechanism brought into play to provide a rebalancing in the value of scrap metals,” he said.
“A lot of people have proposed that consideration should be given to some mechanism that would provide a rebalancing for the industry. That is patently what is needed.
“We need to see VAT relief, for example, on ferrous scrap, which would be a positive that would go some way to reducing its cost in comparison with primary raw materials such as iron ore.
“If the Government really wants to help the industry and improve on the environmental benefits of recycling, that’s the way to do it.”
Hetherington said that falls in domestic and global demand for scrap metal had left the industry in a “very, very sensitive” position. But he added that the outlook was not one of a “doomsday scenario” for the industry.
“Personally, I don’t think we’re at the point of seeing light iron scrap being fly-tipped at the side of the road because it is still a valuable commodity,” he said. “But the processing costs and transport costs are a determining factor.”