Continued Scrap Slowdown

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In the April 10, 2016 edition of Buffalo News a story by Matt Glynn titled ‘Scrap economics hit home: Drop in price follows boom times’ told us the following: “Scrap prices have fallen by 50% in four years, forcing scrap sites to find ways to navigate a tough market. The demand from overseas markets such as Turkey and China, which were big customers of scrap, has slowed. That puts pressure down the supply chain, all the way to scrap sites in the Buffalo area that collect material to feed the industry’s pipeline. Industry watchers say 2015 was an exceptionally awful year for scrap prices. And while the boom times have not returned, observers say prices are showing at least some signs of improvement.

Marks Auto in Buffalo sees the ebbs and flows of the industry as it collects junk cars known as end-of life vehicles. After customers harvest the cars of reusable components, the vehicles are crushed in a machine, stacked, and shipped out for shredding, to a steel mill. Martin T. Marks, VP, says business has weathered the drop in prices by emphasizing its auto component sales. The Institute for Scrap Recycling Industries said nationwide, about 78 yards have closed in the past year, including some that had multiple yards. The industry group said that based on the current climate, additional closings and consolidations are expected this year. According to data from the Steel Index, U.S. scrap steel prices were about $200 per ton last month, compared to more than $400 per ton in 2011 & 2012.

Dan Marks, operations manager for Marks Auto says he avoided the mistake some yards made of getting hooked on a bull market for scrap, the same way some investors hold on to a hot stock too long. Everything boils down to price. Nowadays, Marks pays an average of $150 for an end-of-life car. When prices were hotter, they would pay about $300 for a vehicle – assuming a rival yard wasn’t willing to outbid. Scrap prices often are determined by global economics. Todd Levin, president of Niagara Falls-based Niagara Metals says there was a lot of demand out of China. But as China’s manufacturing upswing abated, so did demand for scrap exported from the US. When oil prices dropped last year, it should have been a hint that scrap metal prices would fall. And when export markets cool off, the U.S. scrap metal suppliers who used to export try to sell to the domestic market, creating greater competition for yards that don’t send their material to overseas customers.

Niagara Metals collects about 50% of its material from factories, about 30% from demolition and construction projects, and the other 20% from the public. It sends what it processes to steel mills as close as Hamilton, Ont., and as far away as Indiana. Last year, when scrap metal prices fell off, Niagara Metals saw the volume of material it took in fall 40%. In some cases, he said, building demolitions were put on hold because the projects would recover too little for the steel that would be salvaged. And some potential customers were less inclined to gather material and bring it in if they weren’t going to receive much for it. Dan Marks explained that from the environmental standpoint, it’s the worst thing that can happen, because you don’t want these heavy metals in a landfill, you want them recycled. The article can be viewed in its entirety at this link.

Where is the place that is the highest paying for junk cars?

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