Saturday, May 29, 2010


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I am sure most entrepreneurs would agree with me that trading offers the best option for the survival of any business in Nigeria because it requires no electricity input which is the major problem of most manufacturers in Nigeria. When you add this to the fact that metal scrap trading is one of those little know lucrative business that is fast creating more middle class income earners in the country ,only then would you realize the rare opportunity you are presented it in this article.

Scrap is a term used to describe recyclable materials left over from every manner of product consumption, such as parts of vehicles, building supplies, and surplus materials. Often confused with waste, scrap in fact has significant monetary value.

Metal scrap are generally classified into three {3} namely HMS 1, HMS 2 and USED RAILS.

HMS is 'Heavy Melting Scrap'. It is the generic term for most types of heavy steel scrap, normally cut to a size not exceeding 1.5m x 0.5m. It consists of cut lengths of pipe, re-bar, angles, steel poles, H or I beams, ships plate and so on. HMS 1 is the term for heavier scrap which has a density of at least 0.7 tons per cubic meter, whereas HMS 2 would be lighter steel scrap such as thin wall tubing (e.g. bicycle frames), sheet scrap less than 3.2mm thick and so on. The two are normally sold together with a ratio of 80/20 {HMS 1&2} heavy and light, and so this would be the typical product being referred to when scrap dealers and traders talk about 'HMS'.

Used Rails are usually sourced from parts of railway equipment and machineries. They are usually more expensive than HMS but the trading of the product in Nigeria is ban except the entrepreneur gets a waiver from government.

It is worthy of note that even with the large deposit of iron ore that have been discovered in the country {about 3 billion MT}, Nigeria has not been able to assert herself as a steel producing nation. Steel you would agree is very important for the industrial attainment of any nation.

Like some other sectors in Nigeria’s economy, the government lack of commitment towards reviving the steel sector is reportedly costing the country over N 100 billion in revenue. The indefinite closure of most of the rolling mills in the country such as Zuma rolling mills in Jos and the Osogbo steel rolling mill, which were both privatized in 2005, accounts for losses of over N 5 Billion. There closure is slowing down growth of the local steel market as service companies now rely largely on imported raw material to operate. Some of the companies include nail companies; security wire companies bolts and nuts manufacturers.

Steel producing plants operating in the country are largely metal scrap based plants mainly operated by the private sector and uses metal scrap as their raw material to produce the local steel needs of the country. These plants are mostly located in south western part of the country and they need constant supply of metal scrap for the production of steel billets and steel rods.

The market for metal scrap is both local and international with China as the largest importing country but for the purpose of this write-up, I would only concentrate on the local market.

Going forward with the industrial policy of government as it affects steel development and the building of local capacity, the government placed a ban on the export of iron ore and metal scraps. This has helped to deepen the local market.

Because of the multiplicity role steel plays in the development of any nation, the demand for metal scrap from these smelting plants in Nigeria continues to grow at a faster rate than the supply. The supply gap that exists is expected to continue to expand as construction and manufacturing activities continues to grow.

Metal scrap can be sourced from junk yars, mechanic workshop, spare part dealers shop or even police station. As at the time of writing this article, the price of the product ranges between N38, 000 – N45, 000 depending on the quality of the scrap supplied.

It is important that the investor gets to know the prevailing price before purchasing the product in order to make maximum returns on investment.

The capital required to start the business depends on the financial strength and the negotiating skills of the entrepreneur. On the average, with N 100,000 or even less one can start the business and the return on investment is between 20% -30% per transaction.

The good side of the business is that it requires little capital to start which makes it easy for micro finance banks to sponsor.

At Foraminifera Market Research {}, we provide bespoke and up to date market research reports for beginners in the metal scrap business

Our reports are designed to assist start-ups to understand the legal and financial requirements of starting the business, the market trends vis-a-vis demand and supply, competition, risk identification and mitigation strategies.

Do you know you can access to over 50 market intelligence reports and our monthly E- Magazine for 12 months for just N 5,000?

Click on the link below to know more about this offer.
At Foraminifera Market Research {}, we provide bespoke and up to date market research reports for start-ups and those already in business.

Our reports are designed to assist start-ups to understand the legal and financial requirements of starting the business, the market trends vis-a-vis demand and supply, competition, risk identification and mitigation strategies. 

You can order our detailed feasibility report on metal scrap trading in Nigeria by clicking on the link below.

Report Code: FORA/08/2011/111

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