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Auto shredder market down but execs upbeat

Keywords: Tags  scrap, auto shredder, Ben Abrams, Consolidated Scrap Resources, Peter Meyers, Metalico, Adam Mervis, Mervis Industries Don Zulanch


CHICAGO — U.S. auto shredders continue to wrestle with falling profits due to undisciplined buying practices, the willingness to pay top dollar for subpar material and a struggling construction sector, but the trend will eventually reverse itself, according to attendees at AMM’s Steel Scrap Conference in Chicago.

"Shredders have a price margin problem because of demand and falling prices over the past 18 months," said Ben Abrams, president of Consolidated Scrap Resources Inc., York, Pa. "It is more than just an issue of too many shredders in the market. The bigger issue facing shredders is the lack of construction demand and has probably been the biggest obstacle for shredders and prices."

The lack of demand for construction products has reduced the melt rates at mills producing long products, which have a penchant for shredded scrap. The net result has been shredders competing to sell their material to a smaller market. "Less steel produced is less demand and means lower prices," Abrams said.

One executive at a chain of scrapyards with shredding operations is forecasting shred consumption to improve in the Ohio Valley in 2014.

Ohio Valley mills’ shred consumption fell to 90,000 tons per month this year from 140,000 tons per month in 2012, according to Peter Meyers, vice president of ferrous sales and marketing at Cranford, N.J.-based Metalico Inc. "I see some very big increases and expect we’ll get consumption over 160,000 tons per month next year," he said.

During the peaks in shred prices, there was no spread between prime scrap and shredded scrap, and the two commodities were selling for the same price.

Meyers said that mill buyers reward recyclers that can provide clean material. "The shred quality affects purchasing decisions. We have three mills paying premium for low-copper shred. As technology expands on the shredder side and melt shop side, you will see the trend continue for mills to pay a better premium for shred," he said.

Mills are increasing the percentage of shred melted in a charge and this trend will continue, according to Donald Zulanch, senior vice president of Middletown, Ohio-based Cohen Brothers Inc.

Abrams said shred will be the prominent grade down the road. "The trend over the past 20 years is that the more shredded that is produced (the more it) is consumed," he said. Other grades, such as heavy melting scrap (HMS), are thrown into the shredder because shred sells at a premium to HMS.

Adam Mervis, president and chief executive officer of Mervis Industries Inc., Danville, Ill., said that more-disciplined buying practices are needed by shredders, and buyers need to remember where the money is made in a scrap deal. "Scrap dealers have a hard time letting a competitor buy a ton they need to keep their shredder running. But scrap companies make money when they buy scrap, not when they sell scrap," he said.

A trend is emerging where shredders are now paying for vehicles based on the metallics left intact, Mervis added.

Abrams agreed that shredders have been overpaying for materials, but said buying practices ultimately will become more disciplined.


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