In Russia stopped working open-hearth furnaces at metallurgical plants. Left electric that can melt just a mixture of scrap and primary raw materials. Thus, scrap is becoming a strategic activity. In addition, the collection of scrap metal helps the environment. Nizhny Novgorod company — supplier of metal scrap “Metmash” has developed a mobile application for the reception of scrap metal in Ferrum.eco, which will allow suppliers of scrap to choose the most convenient point of reception of metal, and also to obtain a higher payment for the account of non-cash payments and other services. In particular, the application provides for the payment of scrap metal cryptocurrency. Details of the project “invest-foresight” learned from Director of the company Konstantin Voropaeva and a specialist in working with investors Oleg Sokolikhina.

Artist: Yuri Artovsky

From Severstal’s own business

The project belongs to OOO “Metmash”, one of which is owned by Konstantin Nikolaev (data service Circuit. Focus), was in the town of Bor Nizhny Novgorod region. Your business Konstantin Nikolaev organized in 2011, after Severstal closed in the Nizhny Novgorod region the unit for the collection of scrap metal and was centrally buy it from private suppliers. Voropayev worked in this division of the steel company. Today “Metmash” supplying scrap of ferrous and nonferrous metals not only Severstal, but also, NLMK, OEMK, MMK, etc. the Official revenue last year amounted to 45 million rubles. However, the main product for “Metmash” is not metal, and metallurgical slag, which is used as a cost additive for steel production for the year, “Metmash” sells 6-7 thousand tons of slag. The problem is that compared to 2010, the margins on the sale of scrap metal fell by almost half — to about 15%. The main reasons for the decline in profitability became the challenge of working with cash and a large number of competitors. As often happens, the answer to falling margins was the search for ways to improve business performance, including through digitization.

For clearing and mobile app

Ferrum.eco offers the user directly from your smartphone to make free application for the dismantling and removal of scrap and choose the most convenient place for pickup or pad with the most reasonable price, and after dismantling to get money in any way — cash, card, Qiwi wallet, even bitcoin. Availability of different payment channels is very important, including the fact that on 4 December on the website of the State Duma there was a bill about a significant restriction of cash payments for the disposal of scrap and waste of ferrous and (or) non-ferrous metals. In the case of adoption the maximum amount of calculation will be limited to 10 thousand rubles per 1 completion, but not more than 50 thousand rubles per month.

The app is being tested; will soon be in stores by Google and Apple for free download. In July last year was the first export of scrap metal from “Moscow paint factory” through the app Ferrum.eco. Mobile service gives you the opportunity to find the best deals for the export of ferrous and non-ferrous scrap, pursue and close deals, as well as be aware of market trends and purchasing prices for waste scrap.

“The market for scrap collection of individuals represents the real Zimbabwe, where about 30 000 people run the client as filibusters, with my own tools, transport, handing over all a semi-legal venues and, of course, without a license. All this on verbal agreements, no warranties, cash settlement, and not always in the amount expected and the dealer” — describes the situation specialist on work with investors of the project Ferrum.eco Oleg Sokolichin.

This unorganized market is Ferrum.eco wants to digitize, creating an environment for assemblers and inspectors of scrap metal. The experience: the founders of Ferrum.eco has 17 years working in the scrap metal market.

Market share and margin

For three years, Ferrum.eco plans to achieve a volume of 1 million tons, which is 20% of the private market of scrap metal. This will give from 11 to 16 bn of turnover a year for the ecosystem, or 4-5% of the total volume of the Russian market billet black scrap (excluding exports). The company wants to earn on the transaction by charging 3-5% of the margin on volume. For suppliers this should not be burdensome, as they were now up to 4% of turnover spend on attracting depositing the metal. With one ton of scrap — 300-400 rubles. Cashless payments also save procurer costs.

The main rival of Russians — the American structure of Rubicon Global, which is already in the list of “unicorns” and inspired them to develop the applications according to Sokolikhina.

Ferrum.eco need of RUB 13 million in the first year to Refine the application’s backend and primary marketing; it is expected that the first year revenue will exceed 18 million rubles. Hope to invest there: the project is interested in PAO “Severstal”, as its representatives said at a pitch session at the end of last year.

However, with gray market of scrap metal and “Absalom” pretty difficult to deal with via mobile apps, even if there is a law prohibiting cash payments in this area. However, Ferrum.eco is going to do it with better prices and offers reception conditions.

Author: Natalia Kuznetsova

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