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Auto lightweighting may help bolster shredded scrap business

Keywords: Tags  auto shredders, shredded scrap, lightweighting, John Ambrosia

Any attempts to assess the future success of shredders begins with a look at demand. A cursory glance at changes over the past decade suggests that the future could be rosy.

Overall demand for shredded scrap has increased by about 50 percent since 2001, making the fragmented material the most popular grade in the ferrous scrap market, according to U.S. Commerce Department figures. The growth was fueled by export demand, the operational capacities of mini-mills and breakthroughs in shredder technology.

Ten years ago, shredded scrap accounted for about 24 percent of all sales; today, that figure has grown to 30 percent. A decade ago, shredded accounted for 33 percent of all export sales; in 2011, it has been hovering near 40 percent. And in 2001, shredded scrap grabbed about 21 percent of all domestic scrap sales; that figure now stands at around 26 percent.

In raw numbers, an additional 6 million tons of U.S. shredded scrap was sold to domestic and foreign buyers in 2010 compared with a decade ago.

But just as in real estate, the success or failure of a shredder operation depends on location, location, location. In regions overserved by shredders, the competition could drive up supply and drive down potential profits. But in areas underserved, adding a shredding operation right now could improve market share and opportunities.

Meanwhile, producers, processors and providers of scrap also have a dog in the fight over whether steel or aluminum is the “material of choice” for lightweighting vehicles.

The steel and aluminum industries continue to debate the transition to lightweight metals, with the focus drawn toward fuel efficiency standards for cars, which the federal Environmental Protection Agency would like to average as much as 62 miles per gallon (mpg) by 2025. 

Movement to lightweighting will certainly have an impact on the scrap supply chain. One of the keys to lightweighting lies in mass reduction, which the steel industry has been working to achieve for years, according to the Steel Market Development Institute, a division of the American Iron and Steel Institute. Gains in the use of advanced high-strength steels continue to aid lightweighting efforts and improve fuel efficiency.

On the other side of the issue, aluminum advocates say the best way to reduce vehicle weight, and thus reduce emissions, is with the use of lighter-weight material, principally aluminum in place of steel where possible. 

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