Auto Scrap Impact

Our next topic involves how the changes in the market relating to the value of a junk car and old car scrap are impacting things. If you ask anyone who buys old cars and handles junk car towing about the value of a junk car, they will tell you that it has fallen like a “lead balloon”. In fact, many junk car towing outfits and we who buys old cars, are redirecting their focus to other aspects of the industry beside just old car scrap. Barberton Junk Cars allows you to sell us your car for cash and has been scrapping cars for a long time now. Our first news article review was authored by George King Cassell and titled ‘Platinum & Palladium set for physical deficits in 2015’ posted on platts.com on November 19, 2015 with the following information: “Platinum is set for an annual deficit of 20.3 mt in 2015 and palladium a 13.3 mt deficit, Johnson Matthey (JM) said in its review on platinum group metals Thursday. In platinum, overall demand is expected to increase by 3.1 mt for 2015, driven largely by higher than expected investment demand, as well as steady automotive demand and gains in industrial applications. In a reverse of expectations earlier this year, net investment should rise to 11.4 mt. South African mined supply will be the highest since 2011, but low prices will cause a 13% drop in recycling volumes.

JM describes the influence of platinum exchange-traded funds as neutral despite Commerzbank putting total ETF outflows. In palladium, overall demand is expected to drop 12mt. Auto consumption will set a new record of 233.3 mt, but the rate of growth is expected to fall as the Chinese market slows. Palladium supplies are expected to rise by 6% as South African mine output recovers from strikes, whilst scrap again is down. As with platinum, weak steel and PGM prices have meant there is little incentive to scrap cars, and auto catalyst recovery in platinum is expected to fall by 10%. Commerzbank warned both platinum and palladium deficits predicted by JM could turn out to be lower if rising prices were to cause investment demand to cool. JM is the world’s largest refiner of platinum and palladium. The complete article is available here.

To further simply and explain this report, we start off by stating that Platinum, Palladium and Rhodium are commodities that have significant value. A good part of the supply to the market comes from old car scrap and makes up a portion of the value of a junk car, when the catalytic converters, which possess those substances, are recycled. The per ton scrap price of steel has dropped considerably; therefore, there is less incentive for those who buys old cars to aggressively buy and recycle these units. It would seem to me that if the supply derived from mining at flat and less supply comes from the auto recycling side–the prices should increase.

On November 20, 2015 in recyclingtoday.com a story titled ‘Sims issues profit warning, cutting up to 800 jobs’ discusses some of the blowback from the decline in auto recycling profitability as follows: “Sims Metal Management, based in Sydney & New York, issued a profit warning for its upcoming quarter. They will buy back shares of its own stock and is scaling back operations, with a focus on the US. On the company’s website, Sims has warned of flat earnings in the 1st half of its fiscal year and that expects a $230 million impairment charge during. CEO Galdino Claro and CFO Fred Knechtel point to ferrous prices that fell by 30% from September to November as a leading cause. Copper and aluminum have weakened, down 10-15% in the 2nd half of the 2015 calendar year.

Sims announced its intention to scale back operations globally, with its North American scrap yard portfolio facing the heaviest cuts. Sims is taking steps to eliminate as many as 800 jobs and to either cut back operations or idle as many as 35 of its 270 facilities globally. Claro & Knechtel say the largest portion of these initiatives will address challenged operations in the Central Region of North America Metals.  An American Metal Market (AMM) article in November reported that St. Louis-based Alter Trading Company is ‘laying off’ and idling equipment at some facilities; most of the facilities are in the Midwest states. The full story can be viewed in its entirety at this link.

Value of a junk car

The two aforementioned articles assist in providing insight in the old car scrap and junk car towing business woes. We are anxious for a recovery in the ferrous scrap pricing, but are uncertain what will spur such. BJC buys junk cars for cash in Fairlawn, Tallmadge and New Franklin. Our junk car buyer is on hand 6 days a week throughout Coventry Township, Barberton, and Ravenna. Residents of the Portage Lakes, Norton and Monroe Falls, are encouraged to call (330) 732-5865 today. As an established junk car hauler serving the (330) areas such as Copley, Springfield Township and Mogadore, we will buy old cars in any condition.