Fraud rocks global recycling and metals industry

Tobias Kuhm was searching through a pile of discarded circuit boards taller than himself at a German recycling plant when he pulled out a large military-green plate with golden pins and big microchips — a bonanza of precious metals.

“But in the same delivery, you will have boards like these,” said Kuhm, picking up something similar likely to have less precious metal. The head of supply chain management at the Aurubis plant in Lünen added that this was a “challenge”, pointing to the difficult process of estimating how much gold, silver and palladium the whole shipment might contain.

Electronic waste, such as old laptops, phones and smart devices, is a fast-growing sector, according to Aurubis, one of the world’s largest recycling companies, and the World Health Organization.

But unlike copper, which makes up most of the 1mn tonnes of material processed annually by Aurubis, the value of e-scrap cannot be visually estimated and requires lengthy sampling in a lab — an operation suspected of having been exploited by organised criminals.

In September, Aurubis reported an €185mn shortfall of metals in its inventories, revised to €169mn in December, due to suspected collusion between suppliers and employees, while in June it was raided by police over missing goods worth more than €20mn.

The suspected thefts sent shockwaves through the global metals industry following a host of other scandals, with two separate nickel frauds that have affected commodity trader Trafigura and warehouse operator Access World.

At Aurubis, tensions have remained high as a police investigation into the frauds is forcing the company to continue operating as before, without disclosing internally or externally who the suspected employees or suppliers are.

“It’s a nightmare,” said one person with insight into executive-level discussions, adding that the suspected involvement of organised criminals was making it difficult to get those with knowledge of what has happened to talk.

“You don’t mess with organised crime [ . . .] that guy out there knows where you live, knows your family and knows when you walk your dog,” the person said.

Aurubis insists its finances are strong enough to absorb the blows, despite a big hit to profits and a tumbling share price. The company reported a 34 per cent fall in pre-tax profits to €349mn in December, while shares have plummeted 35 per cent since February last year.  

But with the findings of an investigation into the performance of chief executive Roland Haring and three other board members in relation to the scandal expected in the coming days, divisions have emerged on the company’s supervisory board, which oversees the executive board and appoints its members.

One camp is critical of the chief executive and other board-level executives for failing to identify the frauds, while others believe Haring has done the best he could when faced with organised crime.

Kunal Sinha, head of recycling at Glencore, one of the largest e-waste recyclers in the world, admitted the industry was “notorious for having an informal market” and e-scrap and other materials with high levels of precious metals might pass through many hands before landing in the yards of the large recycling companies.

Discarded electronic devices, for example, are usually first collected by local authorities or manufacturers, which then pass them on to companies that do the dismantling and so-called pre-processing, where materials are chopped down into fractions.

“You would have to have a meaningful volume [of scrap] before it would get to us — so our suppliers would be further up in the value chain,” said Aurubis’ chief operating officer of its multi-metal business Inge Höfkens.

“What we’re facing [with suppliers and employees colluding on fraud] doesn’t mean by default that it should harm the entire industry,” she added.

However, the supply of waste with high proportions of precious metals is expected to rise, according to the Sustainable Cycles Programme, which is part of the United Nations Institute for Training and Research (Unitar).

According to UN data published in 2020, less than a fifth of the 53mn tonnes of electronics that people worldwide annually discard — equivalent to the weight of 440 average-sized cruise ships — reaches recycling companies, with the rest cluttering people’s drawers, ending up in landfill or being sold on through hidden channels.

Sinha argued that there is “so much headroom” for countries such as the US, Canada, India and Brazil to implement legislation to raise their global e-waste collection rates that currently range from close to zero to 15 per cent, according to the Global E-waste Statistics Partnership.

As collection rates rise, there is a danger that interest in the sector from fraudsters and criminals will increase too.

Tess Pozzi, head of public affairs at the French recycler Derichebourg Environnement, said criminal activity in the recycling space used to be more closely watched by law enforcement.

But police were increasingly focused on gang activities related to trade in medicines and animals rather than e-scrap, added Pozzi, who is also chair of the e-waste branch of Euric, the European recycling trade body.

“The recyclers are still victims of theft,” she said. “The quantity is really underestimated.”