Ferrous

If it’s true that what comes around goes around, then decisions being made by automotive companies now will have some short-term and medium-term effects on the ferrous scrap market.

General Motors Corp. (GM), Detroit, has announced it will address slumping vehicle sales figures (and forecasts) with a series of temporary plant shutdowns. While the company has not revealed details as of press time, reports indicate 14 of its 29 North American plants will spend some time in idle mode in the first half of 2001.

According to a Reuters report, GM has a 100-day inventory of most vehicle models on hand, far above the 60-day industry standard.

Although the temporary closings schedule is not yet known, almost certainly some of the plants affected will be significant generators of scrap. Either way, if assembly continues to scale back, so will the need for stamped and punched metal parts. “If assembly plants are idled, stamping plants will soon be idled,” notes one scrap buyer.

While scrap pricing and demand at mills and foundries is considered a leading indicator of an economic slump, the reduction in prompt scrap that confirms an economic slowdown is underway has made itself apparent.

“Whether it’s manufacturing from appliances or automotive, we’re seeing a general slowdown from all main groups of our generators,” says the scrap buyer. He adds that appliance makers, like automakers, are “flushing inventories” of finished goods.

“Their business, as a whole, is down 7% to 10%,” he estimates regarding his industrial accounts. The buyer adds that several of the manufacturers are projecting plant shutdowns as well.

A reduction in industrial scrap generation would seem to be the final piece in the scrap trough puzzle, to go along with low pricing, slow peddler trade, and slack mill and foundry demand.

Yards are struggling to operate profitably on thin margins and lower volumes. Auto shredder operators from several different regions report-almost unanimously-running on a reduced schedule to match leaner supply with restricted demand.