Economics of Recycling

Non-ferrous metals are among the most intensively recycled materials in modern economic life. This situation is not the result of recent political encouragement or life style changes. It is the result of centuries of economic development. Several common features of non-ferrous metals have stimulated this development.

Non-ferrous metals are commonly found in the earth but are difficult to find in concentrated form (a deposit), and difficult to extract and refine. This means that non-ferrous metals produced from primary sources sell for relatively high prices.

Approximate (December 2010) prices for "commodity-grade" primary non-ferrous metals were $US 24,200/tonne for nickel, $US2,310/tonne for aluminum, $US9,020/tonne for copper. Lead prices are about $US 2,300/tonne. In contrast, commodity iron and steel ("ferrous") prices vary greatly according to location and quality but currently are in the range of $US 330-410/tonne.

From first use (i.e., fabrication into a product) to end use (i.e., during the life of the finished product), non-ferrous metals retain their basic properties and thus retain their utility value to a much larger extent than in the case of plastics, composites, glass and (to a lesser extent) ferrous metals (steels). At each stage of the production and use process, the non-ferrous metal may be returned to the supply chain without significant loss of its intrinsic properties. It does not degrade and, if contaminated, can be restored to its original quality.

Many first users of non-ferrous metals have developed production technology which allows them to use recycled metals very efficiently with the result that primary and recycled units may be used almost interchangeably.

This means that the commercial value given to recycled metal inputs is much closer to the price of the primary product than is typically the case with industrial materials. In the case of nickel, nickel contained in collected stainless steel scrap is typically valued at between 90 and 92% of the primary nickel metal value.This inter-changeability of primary and recycled nickel and the resulting high value motivates collectors, sorters, shippers and processors to operate the recycling chain effectively.

Even at the low points of metal price cycles, it is usual for secondary metal to continue to be collected and processed intensively even if the volumes offered for sale for melting into new metal may decline. This is because material is held ("hoarded") in anticipation of future higher prices. In this way, secondary metal moderates the nickel price cycle: becoming scarcer during periods of low prices but drawn into the market during periods of high prices.

Actual collection rates for end-of-life metal products will reflect the detailed pattern of use of these products. Thus lead-acid automobile batteries – widely used but sourced and serviced from a narrow supplier base and usually subject to legal requirements for collection – are collected efficiently and are very intensively recycled. By contrast, aluminum cooking foil is widely dispersed in municipal waste streams and usually not collected.

Much primary metal production is from low grade ores containing only a small percentage of the metal. Many of the processes developed to produce primary metal from these low grade ores (e.g., smelters, leaching processes) are also capable of using recycled material with similarly low average percentages of the metals. Lower grade recycled material will command a lower price in the market than higher grade material.

As a general rule, high grade recycled material tends to be bought and used by first-use industry as a substitute for primary metal, paying only slightly less for the material (per tonne of metal contained) compared to the current price of primary metal. By contrast, low grade secondary material tends to be bought and used as feed by primary metal producers, paying a much lower price (per tonne of metal contained) than is obtainable for high grade material.

Non-ferrous metals are generally used in long-life applications with metal products not re-entering the recycling chain until several decades after their initial manufacture. If overall production levels of these products ("demand") has been growing significantly on a long term basis (as is the case for most non-ferrous metals), then the volume of end-of-life products coming back on the market will be much lower than the current volume of production.

Consequently, in a period of steadily increasing demand growth the supply of metal available for recycling will be insufficient. Even if 100% of the material coming available were recaptured through recycling, additional primary metal is needed to meet needs.

Non-ferrous metals can in theory be recycled indefinitely without serious loss of product quality. That said, the economic cost of using a particular metal in the recycled form will vary considerably, depending on the desired specification of the material and the electrical or chemical energy needed to achieve it.