Refiners normally divide
scrap into seven categories:
Industrial
scrap: residues from industrial plating processes: electroforming,
printed circuit boards and electrical contacts are all sources for metallic
scrap;
Hallmarked scrap:
gold jewellery that bears the quality mark of
an approved assay house;
Clean scrap: cuttings
from gold alloys that are not mixed with other
metals, which can be immediately re-melted and rolled or drawn into semi-fabricated
products;
Lemel: mixtures of
unclean gold scrap including solders, filings
and other metal from a jewellery factory;
Sweeps:
originally the material swept up from the floor of a jewellery factory but basically
any very tiny bits of scrap;
Polishings: gold
particles mixed with polishing compounds, mops, buffs and cleaning cloths.
Much of this scrap may be
more generally classed as process scrap,
being part of the regular material circulating as part of a jewellery manufacturer’s
working stock. This is a fairly constant amount. What is more important to the
gold market is the scrap that becomes a sudden source of extra supply either
through distress sales from a particular country (as was seen from Turkey in
1994) due to economic difficulties, or simply because the price rises. Sharp
increases in the gold price in 1974, 1980,
1986 and 1990 brought a considerable amount of scrap back onto the international
market, mainly through dis-hoarding or
a reduction in wholesalers’ stocks in the Middle East and Asia. Even
though much of this scrap is not shipped back to international refineries, it
can have a significant impact on gold demand because it will simply be re-melted
locally and re-used in jewellery, thus eliminating the need for fresh gold imports
from the international market place. In special economic circumstances, nations
such as Egypt and Argentina relied for several years entirely on local scrap
for jewellery fabrication.
Much the same occurred in 1998, but on a larger scale, when the economic crisis
that struck East Asia that year led to the region generating hundreds of tonnes
of scrap and, for a while, becoming a net supplier of gold to the international
market.
In countries such as India
and Saudi Arabia, the regular trading in of old ornaments for new always contributes
significantly to local supply: in Saudi Arabia around forty per cent of jewellery
is made from local scrap each year. Scrap from the melting
down of bullion coins has also been an
increasing source of supply in Europe.
Scrap can be generated within
a matter of days if the price increases quickly and can be a factor in slowing
that rise. The limiting factor is often refinery capacity, which simply cannot
handle all the material that may suddenly be offered. If the scrap cannot be
assayed swiftly, and thus paid for, the process
of buying it slows down through lack of cash flow. In 1980, in particular, much
more scrap would have come back had the refineries been able to assay and pay
quickly enough.
Scrap
The broad term for any gold
which is sent back to a refiner or processor
for recycling; it is also known as secondary metal. Scrap can be a significant
element in gold supply, especially in times of sudden price rises. GFMS
data show that supply from fabricated old gold scrap amounted to nearly 706 tonnes
(22.7 million oz) in 2001, representing about 18% of total supply to the market
that year.