[Severian]

Prosecute the scrap metal yards more harshly, have a "police book" like used car lots and pawn shops. Document the person selling, get a photo of the same with the persons face, etc, etc.

Only allow maximum amounts of metal to be recycled unless said person has a registered business, per day/week/whatever. Regulate it.

There isn't an incentive if you can't sell it. As a commentator indicated below people were scrapping fire hydrants. Wouldn't this be a huge red flag??

"Oh yeah, I see you have 5 hydrants here to sell. I can't think of where these could have possibly have come from."