Gold recycling to remain low – World Gold Council
The recycling of gold, which fell to a seven- year low in 2014, is expected to remain low this year, and possibly decrease further owing to substantial near-market supply being flushed out, the World Gold Council (WGC) reported last week.
“The decline in recycling in 2014 was widespread across both developing and industrial countries, although more severe in the latter,” WGC market intelligence head Alistair Hewitt commented.
Gold recycling’s seven-year low is seen partly as a result of gold prices being lower than they were several years ago, leading to less distress selling as a result of greater economic stability, and the depletion of near-market gold recycling materials.
Looking forward, Hewitt postulated that reduced volumes of distress selling might suppress recycling volumes still further, with many recycling collectors struggling to source stock.
“That said, recycling is the most dynamic element of supply and helps balance the gold market; any price increase in 2015 may elicit an increase in gold recycling volumes,” he added.
The council’s latest recycling report, published in tandem with the The Boston Consulting Group, analyses the economic drivers of the global gold recycling market and highlights important future industry trends, which include a shift in the concentration of gold recycling from west to east, along with increased difficulty in obtaining gold from electronic products as less is used in modern devices, and potential consolidation within the recycling industry across the entire value chain.
The report examines the challenges and opportunities facing the gold recycling industry, which has two main components – high-value recycled gold and industrial recycled gold.
The growing volume in waste electrical and electronic equipment offers opportunities for industrial material recycling, although obtaining gold from this material will become ever harder as smaller amounts of gold are used in them.
Further, as Asia’s stock of gold keeps growing, the ‘centre of gravity’ for gold recycling will likely shift east, against the background of India’s and China’s gold jewellery consumption rising from 28% of the global total in 2004 to 60% in 2014.
As a consequence, local competition for gold recycling business could heat up in Asia.
Between 1995 and 2013, recycled gold accounted for a third of total supply and an analysis of recycling data from 1982 to 2012 reveals that price fluctuations accounted for around 75% of the changes in recycling volumes and that economic shocks can boost recycling by up to 20%.
Intensified competition and overcapacity in the near- and midterms represent the main challenges for both the high-value and industrial gold recycling segments, the report finds.
In addition, falls in precious metal prices have squeezed margins along the recycling value chain, spurring consolidation.
Industry players in the gold recycling market face a complex blend of challenges and opportunities. Chief among the challenges is overcapacity, particularly in waste electrical and electronic equipment recycling, which has nearly doubled over the past ten years.
“To succeed, companies must rethink their competitive strategies and operating models, including leveraging economies of scale through mergers and acquisitions and strengthening their operational excellence and reputation among customers,” The Boston Consulting Group partner and MD Matthias Tauber said.
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