NEW YORK Shredders in
Hurricane Sandy-ravaged New York and New Jersey expect to be
inundated with totaled cars in the next two months, according
to several market participants, although the impact on ferrous
scrap buying prices at steel mills in and around the
Mid-Atlantic region could be minimal.
Industry consensus shows that
anywhere from 100,000 to 250,000 damaged cars could enter the
recycling stream during the next 60 days. According to industry
estimates, 100,000 cars can deliver about 80,000 tons of scrap,
indicating a huge onslaught in the coming months.
Sources also anticipate large
volumes of light iron shredder feed coming in from damaged
housing and commercial sites. The combination of construction
wreckage and auto bodies will likely push shredder feed prices
lower when volumes peak at shredder scales, but most sources
suggested it would have little impact on consumer buying prices
because the excess flow of scrap will reach an area that has
few steel mills.
A few cautioned that much
depends on what recycling route the cars take once insurance
claims are settled.
"If the cars go direct to
shredders, we will see more nonferrous recovery. If they go to
(self-service used auto parts operations) first, it wont
make a difference," one source said.
Increased scrap flows are also
likely to be balanced out by higher demand from mills due to
rebuilding efforts. The spike in both supply and demand will
result in a marginal, if any, impact on scrap prices to mills,
However, any negative impact on
the overall economy as a result of the impending "fiscal cliff"
could impede that, a second source said.
Unlike the post-Hurricane
Katrina environment, when a handful of scrap processors were
flooded with scrap, sources said the New York-New Jersey area
houses a much higher concentration of scrap processors and
shredders, which could result in a short-term spike in flow.
Many sources expect the scrap processed by these companies to
be consumed quickly by domestic and export markets, resulting
in a shorter one- to two-month period of unseasonal trends
before the regional markets return to normalcy.
"Katrina was really centralized
to one area, so Im not too sure how much it affected the
scrap market down there. Sandy was so massive and the damage so
spread out that the amount of scrap that will be generated will
be massive. Shredder feed will not be short for the next few
months, in my opinion," a third source said. "Then, once
building starts, you will see a huge demand for building
products, which will boost domestic demand. This I dont
think we will see for a few months, though."
Most sources believe any
increase in auto production will have, at most, a slight impact
on the supply and price of prompt industrial scrap because most
of the scrap produced from auto manufacturing is expected to
return to mills that supply the auto sector.
Sources said they expect the
used car market to light up first, with a significantly smaller
percentage of drivers turning to new cars for replacements.
"There will be new cars bought.
Steel will be impacted on the flat-roll side, in my opinion. It
will, in the end, gradually add some prime supply to the
market," a fourth source said. "But that impact will not be
felt immediately or all at once. That will be more of a gradual
impact spread evenly and more regionally."