The scrap metal industry is a multi-billion-dollar industry in Australia, but there are growing concerns a lack of regulation and enforcement is fuelling a thriving black market.

The biggest buyers of scrap metal, including Australia’s largest steelmaker BlueScope Steel, have supported a ban on the export of unprocessed ferrous scrap metal.

Steel companies currently import scrap due to domestic shortages, despite more than 2.5 million tonnes of scrap being shipped overseas each year.

Unprocessed scrap accounts for about 1 million tonnes of total exports, and processing it onshore would open up a valuable domestic stockpile.

But businesses in the industry believe the ban would also have another benefit — curtailing the illegal trade of scrap which they claim is rife.

Sell and Parker is one of the largest scrap metal merchants in the country, and owner Luke Parker says the industry needs better oversight.

“It would certainly help clean up the industry,” Mr Parker said.

“One being how they pay for their scrap, another being how they process it.”

Cash for scrap

Sell and Parker stopped paying cash for scrap in 2016 when the practice was criminalised in New South Wales.

At the time the company was paying $35 million in cash for scrap each year.

Mr Parker estimates the current illegal scrap market would have an annual turnover of $500 million.

Many businesses still advertise cash for scrap, and last week three contractors were charged after they allegedly sold millions of dollars in stolen copper cable to “corrupt” merchants.

“At the moment it is WWE, as we call it, World Without Enforcement,” Mr Parker said.

“It is frustrating for the compliant operators. We do the right thing while other people are non-compliant, and it appears at the moment there are no consequences.

In response to a question on notice from independent MLC Rod Roberts, the NSW government confirmed there have been three prosecutions for breaches of the Scrap Metal Industry Act since 2016.

Just two of those operators have been convicted, the most recent of which was in 2019.

In 2022, an AUSTRAC report found the scrap metal industry was at a “high-risk” of being used for trade-based money laundering.

NSW Police said it took a proactive approach in combating the illegal scrap metal trade and regularly conducted business inspections at scrap metal yards.

A police spokesperson said some breaches can be dealt with through infringement notices, so convictions do not “accurately reflect action taken or indeed investigations carried out”.

Mr Parker believes the export ban, alongside more diligent enforcement of the law, would curb the illegal scrap trade.

“The Environmental Protection Agency, SafeWork, those agencies would have a better say on how scrap is handled. That would lead to better environmental outcomes and better safety outcomes.

Scrap metal a ‘sovereign resource’

As steel manufacturers plot the path to net zero, scrap metal has emerged as one of the most critical resources to cut emissions.

British billionaire Sanjeev Gupta’s Whyalla steelworks has committed to building a scrap-fuelled electric arc furnace by 2027.

BlueScope Steel has committed to coal-based steelmaking for the near future, and has identified scrap metal is one of its main avenues to reduce its emissions.

Modelling from Australian Economic Advocacy Solutions (AEAS) found that banning unprocessed steel scrap could reduce carbon emissions by 1.2 million tonnes a year.

Meanwhile domestic demand for scrap in the steelmaking process is expected to grow to 2.5 million tonnes within the next decade, according to the Australian Steel Institute.

“Steel scrap is a sovereign resource,” said ASI chief executive Mark Cain.

A federal Senate inquiry into Australia’s waste reduction and recycling policies will hold hearings in October.

The Minister for Industry and Technology Ed Husic said an unprocessed scrap metal export ban will be on the table.

“It is something we do need to think about as part of the transition towards green metals,” Mr Husic said.

“I have heard the message from Australian steelmakers on that.”

NSW Police and the NSW Police Minister have been contacted for comment.