• Advertise with American Recycler today!


  • Publish an ad in American Recycler because we get results. Don't hesitate!

Smaller Default Larger

by This email address is being protected from spambots. You need JavaScript enabled to view it.

During 2016, the automotive scrap metal market was extremely volatile. The year ended on an upswing however, with the average crushed auto body price climbing to the highest mark during the 12 month period, settling at roughly $160 (average) in December 2016.

This was a 14 percent increase from November 2016, and approximately a 43 percent year-over-year increase.

As Felix Maxwell, founder of Junk Car Medics explained, many auto recyclers are still struggling to recover from the downturn in prices that occurred during 2015 and 2016.

The factor having the biggest impact on the U.S. auto recycling industry is the globalization of auto sales that has occurred with the expansion of the Internet.

“There is greater competition as countries from all over the world bid on vehicles that used to only be sold to U.S. buyers,” Maxwell said.

“Wrecked vehicles that U.S. companies could once buy very reasonably are now three to four times more expensive as countries around the world with less regulations on rebuilding salvaged vehicles bid these cars ever higher.”

Not surprising, China has had the biggest impact as a country on the automotive recycling industry in the U.S. As it has for many years, China either creates a surge in scrap vehicle pricing in the U.S. or creates depressed prices.

“Recently it has been the latter with the Chinese dumping cheap steel imports into the U.S., causing domestic prices to plummet drastically,” Maxwell said. “Luckily our government has imposed certain tariffs which has helped prices to recover somewhat.”

However, the drop in the market led to many yards having to close or even combine with others to compete.

In the U.S., nearly 12 million cars are recycled every year. In Europe every year, nearly 8 million vehicles are recycled, and that number continues to rise. The Automotive Recyclers Association (ARA) reported that, the International Transport Forum estimated a global vehicle fleet of 2.5 billion by 2050.

U.S. auto recycling companies must stay on top of the industry developments and changes, both on a national and international scale.

“They have to find new ways to source vehicles,” Maxwell said. “Recyclers cannot wait for customers to come to them like in the past, they must seek out new customers.”

This means attending and bidding at auctions that they normally would not have and sourcing vehicles from farther away. The current competitive environment has also made auto recyclers look at their marketing strategies – focusing their dollars on more Internet based advertising. This is where a majority of customers are looking nowadays – whether it be for auto parts or where to dispose of their vehicle.

“This new environment with lower scrap prices and often a higher cost of acquisition for each vehicle is forcing recyclers to make their operations more efficient and look for alternative sources of revenues,” Maxwell said. “This may include an expansion of parts sales, cores or breaking down a vehicle further into its basic raw materials.”

Maxwell stressed that it’s important to pay attention to the market and manage your inventory properly.

“Smaller profit margins are real. I believe the days of sitting on inventory and waiting for the market to shift are over,” Maxwell said. “The global market will impact the prices here so determine how you want to best manage that.”

Jeff Zappone, senior managing director, Conway MacKenzie, explained that the auto recycling market in the U.S. is currently unstable – mainly due to the fluctuations in pricing of metals and other commodities – in addition to uncertainties surrounding taxes, tariffs, increased regulation, etc., brought on by the recent election.

“The fact that auto recycling is now prevalent in so many countries adds increased competition to the U.S. market in regards to parts and vehicles being exported out of the country for a better price,” Zappone said. “U.S. salvage auction companies are selling vehicles to buyers all over the world.”

The smaller U.S. companies in the industry are looking to maintain strong relationships with their suppliers so their potential inventory is not exported; in addition to increasing their marketing efforts to obtain new business.

“The larger U.S companies in the industry are exploring ways to create a presence in the global market by either expanding their operations or through an acquisition,” Zappone said. “Auto recycling is an ever changing market throughout the world and it is important to be knowledgeable of advances in technology and how customer needs may change.”

Innovative Strategies

Automotive recycling laws and regulations differ by country and region; the social infrastructure, including collection routes and the status of recycling industries, also varies.

As the global market for recycled automobiles continues to rise and  impact U.S automobile recycling companies, it’s important to take note of some innovative strategies being used by countries throughout the world to impact the recyclability of end-of-life vehicles.

For example, the number of cars sold in India is projected to grow from 2.2 million vehicles back in 2010 to 10.6 million units by 2020. Currently, some 28 million vehicles are said to be over 15 years old and ‘ready for scrapping’.

Because of this, the Indian government has recently proposed offering consumers a monetary incentive for a passenger car handed in for scrapping in the hopes to boost recycling rates.

Also, according to Recycling International, Indian steel services company Mahindra Intertrade has signed a formal joint venture agreement for high-tech auto shredding to boost the country’s recycling capability.

This ‘first-of-its-kind facility’ for India is intended to bring together all aspects of car recycling, from collection, compaction, transportation, depollution, dismantling, shredding and recycling to disposal. The joint venture is described as a “first step” towards recycling 100 percent of all the materials in India’s abundant end-of-life vehicles.

In Turkey, major depollution equipment provider SEDA of Austria has been involved in the start-up of what is claimed to be the first training center for car recycling in Turkey. The project was funded by the Dutch government and supported by experts at Auto Recycling Netherlands. SEDA has 40 years worth of experience in the car dismantling business, serving a customer base of over 3,000 companies worldwide.

Turkey’s first car recycling plant was launched in 2011 and is said to process an estimated 100,000 vehicles annually. According to Turkish government officials, the country is aiming to comply with the EU’s 95 percent car recycling target set for 2020.

Even with the current global initiatives and subsequent challenges, the automotive recycling market presents strong prospects for the industry. With a growing world population and a record number of vehicles globally on the road there will be no shortage of need to find ways of sustainably removing these vehicles from the road and recycling their various components in the most environmentally friendly way.

Despite the U.S. vehicle fleet continuing to grow, Zappone warned that auto recyclers in the U.S. will continue to face an unstable market due to pricing pressures and increased competition from both local and global markets.

Recyclers must embrace the new more unpredictable way of doing business in this global economy and be prepared for any fluctuation that comes their way.

“They will need to find a way to adapt to the ever changing marketplace as their customers’ automotive needs transition from mainly gas powered vehicles into hybrid and electric vehicles,” Maxwell said. “The new global economy will present U.S. auto recyclers with greater outlets to sell their products around the world not having to solely remain on local customers within a small radius. The auto recyclers that streamline their operations and maximize every dollar received out of each vehicle will continue to find success.”

Published in the April 2017 Edition of American Recycler News