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, sources said.
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."