Ferrous

SUMMER SHORTS

The swift fall in ferrous scrap pricing this spring is being blamed for a lack of supply in June and July, as is the traditional summer slump in auto production.

Some ferrous scrap processors are reporting their lowest inventory levels in recent memory, as the one-two punch affecting industrial and obsolete scrap has caused them to see bare pavement in large portions of their yards.

On the industrial scrap side, the traditional winding down of the automotive model year cycle has slowed down stamping operations. Sales figures in early 2005 have shown that escalating gasoline prices have caused buying habits to migrate toward smaller vehicles, causing particular grief for sport utility vehicle assembly plants and their suppliers.

At the same time, sliding scale prices that included a notable plunge from May to June have put a scent of speculation in the air for some auto dismantlers and other large suppliers of obsolete scrap. "We’re seeing some people hold on to material, especially after the big drop," says one Midwest recycler.

A lot of these generators have room to build up inventory, as the high pricing of this past fall and winter caused them to sell off everything they could ship. The recycler notes that the higher pricing is still fresh on their minds and they will probably be willing to wait a couple of months or more until they get the price they like.

The lack of supply will almost certainly cause at least a mild bump up in pricing, as mills will have to compete for whatever material can be found.

Ferrous recyclers are hopeful that at least one of the two spigots of supply will open back up as fall approaches. Employee discount sales promotions helped the Big Three sell off some of their inventories, but June production figures circulated by CSM Worldwide, Detroit, show the domestic automakers continuing to "institute downtime across their operations in North America."

Recyclers located near Honda, Nissan and Toyota plants and suppliers are probably faring better, as vehicle output at those companies’ North American plants is up 25.4, 19.7 and 5.2 percent respectively, according to CSM.

At least two different auto shredder operators—one located in Ohio, another in the Southeastern United States—are resigned to scaling back shredder operating hours in the near-term because of the scarcity of material.

"Supply is a problem," reports the Ohioan, "and everybody is aggressive in terms of getting what material is out there. Purchasing material will be a challenge."

(Additional news about ferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)