The Latvian Competition Council (CC) has concluded a comprehensive market supervision of the scrap metal sector, finding that increasing barriers to entry and rising market concentration pose significant risks to competition in the long term. The number of companies active in the scrap metal procurement market—covering both ferrous and non-ferrous scrap—has almost halved over the past decade.
The investigation was launched following complaints from market participants concerning regulatory constraints, market structure, and limited access to essential infrastructure. Its objective was to evaluate the competitive landscape and identify the main operators and structural features shaping the Latvian scrap metal procurement market.
According to the CC’s findings, although a relatively large number of firms continue to operate in the sector, market consolidation has advanced considerably. Companies within the TOLMETS group now own nearly half of all active scrap metal acceptance sites and, in 2023, accounted for 57.8% of total industry turnover. This significant market power—strengthened by economies of scale and extensive vertical integration, from collection to sale—substantially limits the ability of smaller players to compete on equal terms.
The inquiry also highlighted several barriers preventing new firms from entering the market. Regulatory requirements, including the permitting process and the level of mandatory financial security, were found to be both lengthy and financially burdensome. Establishing new acceptance areas is further complicated by administrative hurdles and public resistance. High initial investment needs, long payback periods, and the necessity of specialised equipment add to the challenges. At the same time, the dominant position of TOLMETS—benefiting from large-scale processing—discourages prospective entrants and constrains competitive dynamics.
In light of these findings, the CC has urged the Ministry of Climate and Energy to review the current regulation governing financial security obligations for scrap metal management companies. The Council recommends assessing a proportional model in which the amount of financial security is linked to the number of acceptance sites operated by each company. The current system, the CC notes, imposes a disproportionately heavy burden on smaller market participants and undermines fair competition.
The authority also reiterated its earlier call for the Ministry of Smart Administration and Regional Development to conduct periodic reviews—at least every three to five years—of all regulatory frameworks requiring financial security. Such reviews are essential to ensure that regulatory obligations remain aligned with the evolving conditions of the industry.