Analysis: Auto shredder operators face long-term questions

The numerous high-capacity metal shredding plants installed globally have traditionally relied on end-of-life vehicles (ELVs), or auto hulks, as important feedstock. Plant operators who tap into the regional ELV market can help ensure they have adequate feedstock to reach a profitable operating rate.

Throughout most of the last several decades, shredding plant owners could count on a steady-to-growing stream of ELVs hitting the market, though with some volatility tied to economic downturns.

Several trends in personal transportation, however, threaten to disrupt the longstanding conditions under which plants have operated. These include the emergence of electric vehicles (EVs) and the possibility that in some parts of the world, privately owned cars will be seen as less necessary.

The replacement of internal combustion engine (ICE) vehicles with EVs has become policy in several nations and is taking place more slowly—but steadily—based on market forces in others, including the United States.

A report prepared in the first half of this year by the Paris-based International Energy Agency says light-duty (passenger and small commercial) EV sales grew by 35 percent globally in the first quarter of 2023, bringing the global EV sales share to around 18 percent, up from 14 percent in 2022.

While China and Europe are leaders in the global market share evolution, in the U.S., more than 320,000 EVs were sold in the first quarter of this year, 60 percent more than in the same period last year.

It is not just what EVs lack but also what they include that can appear troubling for the shredding sector.

As with ICE vehicles, EV batteries will be handled separately by dismantlers and a growing specialty EV battery recycling sector. At least one global recycling association, the Washington-based Institute of Scrap Recycling Industries, has begun offering guidance to this emerging sector.

What is missing under the hood also is critical, and it includes some 23 percent of the iron and steel found in the average ICE vehicle, according to a breakdown offered by the Brussels-based World Steel Association, which credits the International Organization of Motor Vehicle Manufacturers for the figure.

The body panels of EVs could prove out of reach for shredder operators as well, even as ultra-high strength steel and advanced high-strength steel body panels compete with aluminum sheet.

A staff member of U.S.-based steelmaker Nucor Corp. indicated at a 2019 industry event that the current iterations of these specialty steels could be unwelcome at some melt shops or, conversely, worth separating and directing toward specialty furnaces.

In the case of aluminum or high-strength steel body panels (and with bountiful copper cables and wires), auto dismantlers will face several new options and choices when they begin seeing more EVs than ICE vehicles at their shops.

Should the dismantling sector be rewarded for separating and selling as separate scrap grades body panels and copper wiring, that will leave very little remaining for shredding plants.

To add just one more red flag to the mix, a recent McKinsey research report questioned to what extent private passenger vehicle ownership levels have peaked in nations with developed economies.

The firm found in a 2022 survey that nearly half of respondents (46 percent) told McKinsey they “are open to replacing their private vehicles with other modes of transport in the coming decade.”

There is no guarantee the trends of the early 2020s represent inevitable momentum toward these radical shifts involving what ELVs are comprised of and how many passenger vehicles are sold overall.

However, for a sector that is already facing scrutiny regarding emissions and dust, a reduction in this form of complicated feedstock (which helped make capital expenditures in shredding make sense in the first place) is an uncomfortable thought.

In short, shredder operators who are accustomed to auto hulks representing a double-digit percentage of their feedstock could be well served to keep in mind what is literally coming down the road by the end of this decade.