How to start a Scrap Metal Trading business in the UAE?
The UAE has numerous strategic industries, and they significantly depend on heavy metals as raw materials. The Scrap Business License in the UAE is available in the Free Zones and also in the Mainland of UAE. Beyond the business segment, scrap metal trading has a social and environmental commitment.
The steel and aluminium fabrication companies, other manufacturing units, etc., have significant wastage in the form of scrap metal. So, the scrap metal trading sector is witnessing a positive growth rate.
Scrap metal trading or recycling helps in reducing the wastage going to landfills and has a positive environmental impact. So, there is immense demand for service providers for restoring the industrial waste.
Scrap Metal Trading in the UAE
The following items make up the industrial scrap metal segment. They are metal parts, discarded equipment, metal sheets, used car parts, used electronic equipment parts, scaffoldings, frames, construction waste, metal wires, metal beams, etc. Scrap Metal Trading involves the recycling or reselling of any scrap item that contains metal elements.
So, on a broader level of Scrap Trading, the recycling includes any raw materials and products containing plastic, paper, fabric, etc.
In the UAE, Sharjah is one of the hubs for the scrap trading business. The industrial areas and Warehouses in the Sharah Airport Free Zone and Hamriyah Free Zone provide ideal ecosystem for scrap recycling and storage for the export of scrap items.
Choosing Free Zone or Mainland for Scrap Metal Trading
In terms of obtaining a license for scrap metal trading in the UAE, the best option is the mainland, as there is a vast availability of land for building a warehouse or renting an available warehouse in the industrial areas.
Alternatively, the Free Zones also offer ample options at an attractive cost. A few Free Zones in the UAE have warehouses within their jurisdiction and they are ideal for scrap metal trading.
There are no special approvals for a scrap trading company license. However, the company must meet a few logistical requirements before obtaining the Scrap Trading License.
The Scrap Metal Trading Company must have a dumping yard to collect all the waste, or decide on whether to export the scrap directly, or recycle it into other products, etc.
Popular Business Models for Scrap Trading
These are the most common ways a scrap trading company can operate in the UAE. All they have to do is get a scrap metal trading license from the Free Zones or the Mainland of UAE.
1. Import and Sell Locally
One option is to import metal or other scrap from abroad to the UAE and then resell it to the dealers here in the UAE.
2. Collect Locally and Export
The next option is to collect the scrap materials locally and then export them to other countries. The investor must find buyers who are interested in buying scrap from him.
3. Process Scrap In-house
The next option is processing the scrap in-house and selling the recycled product. It will include remanufactured metal wires, plastic bottles, metal sheets, copper wires, aluminium foils etc.
How the Scraps are Classified
Also, most of the scrap collected by the Scrap Trading companies belongs to either of the following categories.
1. Metal Scrap
It includes industrial waste with elements such as iron, aluminium, copper, and steel. It can be reprocessed for selling locally or for exporting to other countries.
2. E-waste Recycling
Recycling or refurbishing electronic waste like mobile phones, computers, and batteries.
3. Plastic Scrap Collection & Recycling
Plastic waste and reusable raw materials.
4. Paper & Cardboard Recycling
Recycling paper-based products.
5. Vehicle Scrap & Auto Parts Recycling
Repurposing vehicle parts and recycling the metal parts.
Where to Setup a Scrap Metal Trading Company in UAE?
There are two ways to obtain a Scrap Metal Trading License in the UAE. There is the Free Zone license or from the Mainland of the UAE. The investors can decide where to start depending on their business requirements.
They can set up the Scrap Metal Trading Company in the UAE with the objective of either exporting the scrap from the UAE abroad. Otherwise, collect scrap and sell locally to other buyers within the UAE and GCC region. Alternatively, they can set up a reprocessing plant to turn the scrap into recycled products and sell them.
For example, if the investor is planning for the export of Scrap Metal from the UAE, the ideal option would be a Free Zone near the seaport. The Hamriyah Free Zone, Sharjah Airport Free Zone, Dubai Airport Free Zone, etc.
For fulfilling the Scrap collection, a warehouse or storage unit is mandatory, and the company must meet the environmental safety standards.
Steps to Obtain a Scrap Metal Trading License in the UAE
The steps involved in obtaining the scrap metal trading license in the UAE are
1. Choose the Free Zone or the Mainland
2. Select the right business activity from the code
3. Choose the company structure (Free Zone- FZE, FZC, or Limited Liability Company)
4. Prepare the company documents (MOA, AOA, etc.)
5. Provide the investor profile (photograph, passport copy)
6. Take a warehouse or office space, depending on the requirement
7. Make the fee payment and get the trade license
8. Prepare documents for processing the UAE Residence Visa
Additional Requirements for a Scrap Metal Trading Company
There are some additional requirements that the investor must be ready with before setting up a scrap metal trading company. The investor must have a yard/warehouse to dumb the industrial waste. Also, forklifts and equipment to organise the scrap into categories.
Additionally, they must have Weight scales, metal sorting bins, safety and fire protection, re-processing machinery, and designated storage areas must be in place. Also, the company must factor in the requirement of heavy-duty cranes and trucks that can transport the scrap to dealers or buyers.
Logistics Support for Scrap Metal Trading Company
There is a requirement for ample logistics support to operate a Scrap Metal Trading Company. So, investors must have an idea of the requirement for operating capital. There is a significant money outflow in terms of paying the staff, maintaining the ecosystem, transportation, and processing of scrap.
Furthermore, if the investor plans to reprocess or recycle metal waste or scrap, then recycling equipment is a requirement. So, the cost of the equipment must be added while calculating the total operational cost.
The scrap metal trading company must estimate an operating expense of AED 30,000 to AED 40,000 per month for a small-scale setup. Apart from this the equipment cost, delivery truck cost, forklifts, additional machinery, etc., will have to be put on mortgage or EMI payment.
Cost of Scrap Metal Trading License
In the UAE, a Scrap Metal Trading License can be obtained from the Free Zones, starting at AED 14,900 for a 1 visa quota virtual office license. Similarly, in the Mainland of Dubai, it will range from AED 28,000 onwards for the license and virtual office setup.
The cost of taking a warehouse will be additional, and depending on the square footage requirement, the cost will vary from AED 80,000 to AED 250,000 in the Mainland of the UAE.
Furthermore, the advantage of having a Scrap Metal Trading Company in the UAE is the quick documentation, faster trade license issuance, and availability of a top-class warehouse facility.
Also, the UAE has a well-connected logistics network, facilitating easy global import and local selling of Scrap Metals. So, Scrap Metal Trading Companies in the UAE can benefit from the robust business infrastructure, administrative support, and logistics.
Thus, making the scrap metal trading business a profitable one with lower operating costs as much as possible.
To know more about starting a Scrap Metal Trading Company, connect with our expert team right away!
