Korea Zinc’s U.S. Subsidiary, Pedalpoint Holdings, Acquires Global Scrap Metal Trading Company Kataman Metals

6 April 2024

Pedalpoint Holdings, a U.S. subsidiary of nonferrous metal smelting company Korea Zinc (KRX:010130), announced its acquisition of Kataman Metals, a global scrap metal trading company based in St. Louis, USA. This acquisition will be a stepping stone to further strengthen Korea Zinc’s value chain in the resource recycling business, one of the pillars of the company’s new growth engine, dubbed "Troika Drive.”

Korea Zinc stated that it made this investment in its U.S. subsidiary, Pedalpoint Holdings, on April 1st. These funds were utilized to acquire a 100% stake in the global scrap metal trading company Kataman Metals, for USD 55 million. The acquisition is expected to accelerate the company's recycling and resource circulation business, one of its future growth initiatives, by providing access to a platform and expert traders with a broader and more diverse network of scrap metal feedstock sources.

Established in 1993, Kataman Metals possesses over 30 years of experience in the recycling sector and trading expertise based on standout business strategies. As a competitive business that globally trades approximately 300,000 tons of copper, aluminum, iron, and other scrap raw materials annually, the company is expected to demonstrate further prominence in the looming era of circular economies. The company has also displayed excellent financial and risk management capabilities, with sales averaging USD 1.5 billion over the past three years, and has been consistently profitable over that period, paying shareholder dividends every year.

Korea Zinc plans to complete the expansion of its copper (Cu) production facilities within the Onsan Smelter by the first half of 2025, which will require an additional supply of around 130,000 tons of copper scrap per year. In particular, the plan is to significantly reduce carbon emissions in the production process by exclusively using secondary materials (raw materials secured through resource circulation or from waste). Securing a stable supply of raw materials is crucial for this plan to take action. The acquisition of Kataman Metals, which possesses expertise in the recycling market, is highly expected to enable such procurement.

In December 2023, Korea Zinc held its first “Investor Day” event since its foundation. During the event, they outlined plans to enhance their competitiveness in the copper smelting industry through expanded facilities and the establishment of a circular system – ultimately increasing their annual copper production to 150,000 tons. From a long-term perspective, these copper production plans would require a procurement of 300,000 tons of copper scrap raw material at a minimum, which a Kataman Metals representative stated was already possible through just their current portfolio of scrap metal suppliers.

In 2022, Korea Zinc signed a contract through Pedalpoint Holdings to acquire Igneo Holdings, a U.S. electronic waste (e-waste) recycling company with proprietary technology in extracting intermediate materials from e-waste that can be smelted into valuable metals. This additional acquisition has been evaluated by the market as another step in enhancing the company’s value chain, connecting Kataman Metals' raw material procurement, Igneo's e-waste processing technology, and Korea Zinc's manufacturing capabilities for the final product. Pedalpoint Holdings will focus on stabilizing Igneo Holdings' business in 2024 and integrating Kataman Metals as a subsidiary, as well as enhancing synergy between the businesses, to achieve a break-even (reaching USD 1.5 billion in sales with a positive operating profit) within the year.

A spokesperson for Korea Zinc commented, "The secondary raw material market for recycling is undergoing rapid growth. However, the procurement and pricing systems are still unstable, with a myriad of suppliers scattered across the globe. In these market conditions, it is essential to have a group of professional traders with deep knowledge and networks to ensure a smooth supply of materials at competitive prices." They added, "The latest acquisition signifies that we have established a stable platform for sourcing scrap metals while completing the final piece of the puzzle in securing raw materials for our expanding copper production capacity – ultimately allowing us to complete a truly circular value chain."