Market Analysis – 11191614 – Gold scrap

Executive Summary

The global gold scrap market, valued at est. $58.2 billion in 2023, is a critical secondary source for the world's gold supply. Projected to grow at a 5.1% CAGR over the next five years, the market's expansion is driven by high gold prices incentivizing recycling and a growing volume of end-of-life electronics. The primary strategic challenge and opportunity is navigating increasing ESG scrutiny, particularly regarding traceability and the responsible sourcing of e-waste, which offers both reputational risk and the potential for enhanced value capture through certified recycling partnerships.

Market Size & Growth

The global Total Addressable Market (TAM) for gold scrap is estimated at $58.2 billion for 2023. The market is forecast to expand at a compound annual growth rate (CAGR) of 5.1% through 2028, driven by price-sensitive recycling flows and the maturation of e-waste collection streams. The three largest geographic markets for gold scrap processing and consumption are 1. China, 2. India, and 3. United States, reflecting their significant roles in jewelry fabrication, investment demand, and electronics manufacturing/consumption.

Key Drivers & Constraints

1. Gold Price: The single most significant driver. High gold prices directly incentivize consumers and industrial holders to sell old jewelry, coins, and other scrap, increasing supply. Conversely, low prices dampen collection volumes.
2. E-Waste Generation: The growing volume of discarded electronics ("urban mining") is a major structural driver, providing a consistent and high-grade source of gold scrap. Global e-waste is growing by over 2 million metric tons annually [Source - World Health Organization, Jun 2021].
3. Regulatory Pressure: Environmental regulations (e.g., EU WEEE Directive, R2 Standard in the US) govern the collection and processing of e-waste, increasing compliance costs but also creating a market for certified, responsible refiners. Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations add administrative burdens for scrap aggregators.
4. Consumer Behavior & Economic Conditions: In developing economies, gold scrap sales often increase during periods of economic hardship as individuals liquidate personal assets. In developed economies, recycling is more closely tied to fashion cycles and discretionary upgrades.
5. Refining Technology & Capacity: Advances in hydrometallurgical and pyrometallurgical processes improve recovery rates and lower environmental impact. However, refining capacity is concentrated, and bottlenecks can affect processing charges.

Competitive Landscape

Barriers to entry are High, driven by extreme capital intensity for refining facilities, stringent environmental and financial regulatory compliance, and the necessity of achieving trusted certification (e.g., LBMA Good Delivery) to access top-tier markets.

⮕ Tier 1 Leaders * Valcambi SA (Switzerland): One of the world's largest refiners, known for high capacity, technological precision, and a broad portfolio of investment products. * Heraeus (Germany): A technology-focused group with a major precious metals refining division, strong in industrial applications and e-waste processing. * Asahi Refining (Japan/Canada/USA): A major global player formed from the acquisition of Johnson Matthey's gold and silver refining business, with a significant footprint in North America. * PAMP SA (Switzerland): Part of the MKS PAMP GROUP, renowned for its high-quality minted investment bars and advanced anti-counterfeiting technology (Veriscan™).

⮕ Emerging/Niche Players * Umicore (Belgium): Strong focus on "urban mining" and clean technologies, with advanced capabilities in recovering precious metals from complex industrial scrap and e-waste. * Sims Lifecycle Services (Global): An IT asset disposition (ITAD) and electronics recycling specialist, providing secure and certified e-waste processing for large corporations. * ERI (Electronic Recyclers International) (USA): A leading US-based e-waste recycler with a focus on data destruction and environmentally sound recovery. * Mint-X (USA): A technology startup developing novel, less toxic chemical processes for extracting precious metals from e-waste.

Pricing Mechanics

The price paid for gold scrap is derived directly from the global spot price of gold, typically benchmarked against the LBMA Gold Price. The pricing mechanism is a "top-down" model where deductions are made from the intrinsic metallic value. The process begins with an assay to determine the precise purity (fineness) of the gold within the submitted scrap lot.

From the total value of the contained gold, the refiner subtracts a series of charges. These include a treatment charge (TC), often a fixed fee per kilogram or ounce, and a refining charge (RC), which is a percentage of the gold's value. Additional fees may apply for assaying, handling, and financing. The final payable amount is the spot value of the recovered gold minus these cumulative TCs/RCs and fees. The competitiveness of a refiner is determined by the smallness of these deductions and the speed of settlement.

The 3 most volatile cost elements impacting the net price are: 1. Gold Spot Price: The underlying commodity price is the most volatile element, having fluctuated by ~18% over the last 12 months. 2. Energy Costs (Natural Gas/Electricity): Essential for furnace-based refining. Natural gas futures have seen volatility of over 50% in the past 24 months, directly impacting refiners' operating costs and TCs. 3. Foreign Exchange (FX) Rates: As gold is priced in USD but refining often occurs in Switzerland (CHF) or Europe (EUR), currency fluctuations can impact the final settlement value for non-USD entities.

Recent Trends & Innovation

• Blockchain for Traceability (Ongoing): Several refiners and industry bodies are piloting blockchain platforms to create an immutable ledger for recycled gold. This enhances transparency and helps prove the material did not originate from conflict zones or illegal operations, addressing ESG concerns. [Source - World Gold Council, Mar 2022]
• Focus on Green Refining Chemistry (2022-2023): Academic and commercial R&D has accelerated into replacing cyanide in the leaching process. Non-toxic alternatives like thiosulfate and chloride-based systems are gaining traction to reduce environmental risk and compliance costs.
• M&A in E-Waste Sector (Nov 2022): Sims Limited acquired a major stake in Metech, a US e-waste recycler, highlighting the trend of large metal recyclers vertically integrating into the specialized and lucrative e-waste collection and pre-processing space.
• Increased Regulatory Scrutiny on "Cash for Gold" (2023): Financial regulators in the US and EU have increased enforcement of AML/KYC rules on smaller scrap aggregators and "cash for gold" businesses to crack down on illicit financial flows.

Supplier Landscape

Regional Focus: North Carolina (USA)

North Carolina presents a balanced demand profile for gold scrap. The state's significant technology and life sciences sectors in the Research Triangle Park (RTP) area generate a steady stream of high-value e-waste from R&D labs and corporate IT asset turnover. This is complemented by a moderate jewelry manufacturing and retail market. While no Tier 1 refiners operate directly within NC, the state is well-serviced by national logistics networks connecting to major North American refineries like Asahi Refining in Salt Lake City, UT and Brampton, ON. The state has several certified R2 and e-Stewards electronics recyclers, providing local capacity for collection, sorting, and pre-processing. North Carolina's business-friendly tax environment and robust transportation infrastructure support efficient scrap aggregation and outbound logistics. State-level environmental regulations align with federal EPA standards for electronics disposal.

Risk Outlook

Actionable Sourcing Recommendations

1. Implement a Dual-Supplier E-Waste Strategy. Contract with a national, R2-certified ITAD provider (e.g., Sims Lifecycle Services) for secure handling of corporate e-waste. Mandate that resulting precious metal-bearing scrap is tolled to a designated LBMA-certified refiner (e.g., Asahi Refining). This structure maximizes traceability, ensures data security, and leverages the competitive refining rates of a Tier 1 partner, targeting a 10-15% improvement in net value recovery versus all-in-one disposal services.

2. Hedge Price Volatility via Contract Terms. For all scrap contracts, fix refining charges (TCs/RCs) on a semi-annual or annual basis to eliminate operational cost volatility. Structure settlement terms to allow for pricing against the daily LBMA Gold Price on a date of your choosing within a 5-day window post-assay. This provides a crucial, short-term hedge against daily price drops and allows for optimization of settlement timing, protecting value in a volatile market.