The scrap metal industry in Nigeria is rapidly growing. Nigeria’s swift urbanization and industrialization drive this growth. According to a 2019 report by the Ministry of Mines and Steel Development, over 95% of the current steel production in Nigeria is from scrap metal.
Scrap metal refers to discarded metal ( ferrous – steel, iron and non-ferrous – copper, aluminum, and brass.) suitable for reprocessing. Scrap metal sources range from household items like milk tins, old pots, fridges, etc., to construction materials like aluminum roofing sheets and iron rods.
In this guide, we’ll explain everything you need to know about starting and growing a Scrap Metal recycling business in Nigeria.
Understanding the Scrap Metal Business
The first step to starting a successful scrap metal recycling business in Nigeria is understanding the different aspects of the scrap metal business. It’s said that before you start a business, know what you’re getting into; the scrap metal business isnt an exception.
The scrap metal business typically involves buying, collecting, sorting, and selling scrap metals to established recycling companies like Scrapays for profit.
- Collection: The first stage of scrap metal recycling involves collecting scrap metal from individuals, businesses, industries, etc. You can decide to collect the materials yourself or employ collectors. Remuneration can be profit-splitting after sales or outright payment for the scraps they have collected.
- Sorting: After collecting the scrap metal, You’ll need to sort it into different categories, such as aluminum, copper, etc. Sorting would require available space and, in some cases, specific tools like magnets, wire strippers, etc., to effectively sort and available space to store the metals before they are collected.
- Distribution: Selling the sorted materials. At this stage, the recycling company can pick up the materials from you or ask you to deliver them, depending on your prior agreement.
While traditional recycling companies will require you to bargain and haggle for the best prices, with Scrapays, you already know the price scraps will be, eliminating uncertainties. This will also influence how much you buy from the users or collectors.
Market Research and Planning
After understanding the recycling business, it’s essential to conduct thorough market research to analyze the availability and volume of scrap metals in your business area, collection methods, routes, and pricing.
In addition to the above listed, two other essential aspects of Market Research & Planning are;
Competitor Research
Identifying your competitors is vital for strategic planning. Research existing scrap metal businesses to understand their strengths, weaknesses, and market positioning and identify threats and opportunities for a proper SWOT analysis.
Beyond competitors, research potential partners—such as businesses, collectors, and non—profits—with whom you can collaborate for easier business operations.
Read: How to conduct in-depth competitor research.
Developing a Business Plan
A business plan helps clarify your vision for your metal scrapping business. It should include your business goals, objectives, market research, financial projections, potential revenue streams, and marketing strategy.
Your business plan should be detailed and comprehensive. It serves as a roadmap for your business and is crucial if you intend to pitch to investors. The plan should contain Financial projections detailing cost breakdowns for startup and operational expenses, potential revenue based on market research, and a cash flow plan.
Read: how to create an indept business plan for your recycling business.
Funding Your Scrap Metal Business
After determining your business operational model, conducting in-depth market research, and creating a business plan, figure out how to fund your scrap metal recycling business, estimate the startup cost and evaluate available funding options.
Estimating Startup Costs
The costs of starting a scrap metal business can vary depending on factors like size, location, and already available resources, but your typical expenses would include the following:
- Collection and weighing equipment
- Transportation (Wheelbarrows, etc.)
- Initial stock of scrap metals.
- Space for storing collected scrap metals. – You can get a plot or save on cost by using existing space in your compound for storage.
Additional costs may include licensing fees, marketing, and wages if you plan to hire employees.
Funding Options
After estimating startup costs, the next step is raising the funds. Common funding options include;
- Personal savings: Savings is one of the fastest and easiest ways to raise your scrap metal business startup funds. The advantage of funding via personal savings is that you have complete ownership of the business. Personal savings can cover smaller startup costs but may not be sufficient for a larger operation.
- Loans: Loans from cooperatives or banks are another popular source of startup funds. In most cases, bank loans will require a solid business plan and collateral. When considering bank loans, note the high interest rates and the risk of asset seizure on refusal to pay. Scrapays provides collateral-free, low-interest loans to agents who have already started a recycling business and meet specific criteria. Cooperative loans generally have lower interest rates and longer repayment times but usually require active membership and existing savings, among other requirements.
- Investors: Investors can be a great funding source. Investors are typically affluent individuals, firms, friends, and family members. An advantage of investor funding is you have more leverage to negotiate investment terms such as interest rates and repayment periods.
Setting Up Your Operation
Choosing a Location
When selecting a location, consider accessibility for your suppliers and customers. A strategic location near scrap metal sources, like construction sites, would be advantageous. An Ideal location should have motorable roads secure and adequate space for sorting and storing scrap metal gathered.
Setting Up a Proper Storage and Sorting System
Efficient storage and sorting are critical to maximizing profitability in your business. Create a system to separate metals by type and value, ensuring your yard is organized.
Investing in the right gear is necessary to keep you and your staff safe while loading and dealing with scrap metal.
Sourcing Scrap Metal
Getting scrap metals is the next step after successfully setting up your location and establishing storage and sorting systems. Since the volume of scrap metals you can collect and sell determines your average income, getting a consistent supply of these materials is imperative. To ensure this, you need to;
Identify Scrap Metal Materials
The first step to getting a consistent supply of scrap metals is to know which common materials are made of or contain valuable scrap metals, such as;
| Scrap Metal | Everyday Items Containing Scrap Metal |
| Iron | Gas heaters, lawnmowers, stoves, refrigerators, cast iron pans, construction beams, old pipes, weight machines |
| Steel | Old cars, heavy melting steel, steel beams, motorcycles, bicycles, old appliances, water tanks, industrial machinery |
| Copper | Home appliances (fridges, microwaves, washers), copper roofing, electric motors, insulated wires, water pipes, TV cables, power tools |
| Brass | Bolts, pipes, valves, faucets, musical instruments (trumpets, saxophones), door handles, plumbing fixtures, decorative items, light fixtures |
| Aluminum | Beverage cans, automobiles, window frames, doors, household products (foil, trays, air conditioning units), ladders, bike frames |
Identify Scrap Metal Source Locations
Knowing everyday items containing these scrap metals, you can identify where to get these items in your location.
| Scrap Metal | Potential Locations to Find Items |
| Iron | Businesses (appliance repair shops, hotels, restaurants), Construction Sites, Mechanic Villages (cars, old machinery, pipes) |
| Steel | Auto repair shops, scrapyards, construction sites, mechanic villages (motorcycles, bicycles, vehicles) |
| Copper | Electronics repair shops, scrap metal yards, electrical equipment shops, construction sites (wiring, copper pipes), mechanic villages (old motors) |
| Brass | Hardware stores, plumbing supply stores, jewelry shops, construction sites (plumbing fixtures, valves), mechanic villages (old faucets, valves) |
| Aluminum | Beverage manufacturers, construction companies, aluminum processing plants, construction sites (window frames, doors, ladders), mechanic villages (auto parts, bicycles, air conditioning units) |
Collect Scrap Metal & Building Relationships with Suppliers
Building a solid relationship with metal suppliers is critical to having a steady and reliable supply of metals to sell to potential buyers. Research and contact potential suppliers. When you find a supplier you trust, stick with them.
Establish clear terms, foster a positive relationship, provide feedback, and communicate effectively.
Scrap Metal Pricing and Valuation
The prices of these materials fluctuate based on various factors, such as the availability of scrap materials, demand for scrap metal, and transportation and logistics costs.
An established pricing strategy is essential; this will ensure that you dont buy materials from collectors and sell them at a loss. To determine your pricing strategy, you need to;
- Estimate the minimum cost of operation: transportation, sorting, etc.
- Conduct customer research to determine the prices competitors buy and sell for.
- Experiment with your prices to get customer feedback and adjust your prices accordingly.
- Monitoring and adjusting your prices is crucial to your business success.
With Scrapays, you don’t need to keep up with the frequently fluctuating prices – the Scrapays app tells you the prices to buy from collectors and how much Scrapays will buy from you – ensuring you maintain a good profit margin.
Marketing Your Scrap Metal Business
After figuring out the pricing structure (cost and sale), you’re ready to start operations. Like every other business, you need to create awareness, consideration, and eventually sales for your scrap metal business via marketing—online or offline.
- Online Marketing: According to a 2024 report, there are 103 million internet users in Nigeria, and 36.7 million Nigerians are on social media – There’s a high probability your target audience is on social media. Marketing online is a great way to reach them. Some low-cost online marketing channels include;
- Social Media: Social media accounts are free. Create accounts for your business on Instagram and Facebook. Grow your social media following by regularly posting trending but relevant hashtags. Social media also gives your business a layer of credibility and makes it easier for your customers to trust.
- GMB Listing: People search Google daily. Creating and optimizing your Google Business profile increases the probability of potential customers seeing your business when looking for similar services online.
- Infographics: Create educational infographics with canva, brand them, and share them across social media and relevant forums.
- Forums: Active participation in forums such as Nairaland, Quora, and Reddit is a great way to create awareness for your scrap metal recycling business. It’s essential not to be too salesy and promotional but provide value and contribute to conversations.
Offline Marketing
While online marketing is effective and low-cost, it doesn’t entirely replace the need for it —according to the above-quoted report, internet penetration is still at 45.5% in Nigeria.
There are still opportunities to reach your target audience offline. Some low-cost online marketing channels include;
- Participate in local community events to build brand awareness.
- Provide excellent customer service to foster loyalty and positive word-of-mouth.
- Offer educational workshops and seminars on proper recycling practices.
Growing Your Scrap Metal Recycling Business in Nigeria
Scaling your scrap metal business in Nigeria is next after startup. Consider opening new locations. An affordable method of having multiple locations is to have one central sorting centre but multiple collection locations. Scrap metals collected at multiple locations will be transported to the central sorting and storing centre.
Conclusion
In this guide, we’ve covered everything you need to start a recycling business in Nigeria. We’ve mentioned the different niches available to you, provided guides to help you select the right niche, and outlined the steps you need to take to start a recycling business.
Now that you know the steps to starting a scrap metal recycling business in Nigeria, it’s essential to take action and start.
We recommend you start your scrap metal recycling business as a scrapays agent because:
- You need less than 100k to start.
- We’ll provide you with the tech, training, and assets you need to start.
- Anyone can do this business, irrespective of skill or experience level.
- Low barrier to entry.
- We offer continuous support, so you’re not alone.
- The scrap metal recycling business has low risk, and our business development team will help reduce the risk further.
- You can start in less than seven days.
- Our agents make an average of 200k/Month,
Start your scrap metal recycling business today by becoming a Scrapays agent.
