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Metals prices - what the future holds

scrap harnesses
Metal prices aren't what they used to be so it's best to capitalise on increased materials separation while at the same time growing those parts sales.
The metals content of vehicles generates a significant element of the industries’ income. With ferrous scrap metal prices having roughly halved over the last few years, and non ferrous prices anything up to 40% down, where do we go from here.

According to January’s World Bank Report on commodities, all the investment in new supply over the past decade has resulted in a four-year long slow decline. Almost all of the additional metal has gone to meet China’s demand which consumed 47% of the world’s refined metals at the end of 2013, (45%up on 2012). In the last quarter of 2014, the growth of Chinese imports of all metals (except copper) was negative.

The report continues, with an outlook that indicates that metal prices are expected to decline by more than 5% this year (on top of last year’s 6.6% drop) as new supplies will be coupled with weaker demand by China. I know we don’t deal in Iron ore but ferrous scrap prices are related and the report expects iron ore to decline the most in 2015 by up to 22%. Tin, copper and nickel are also decliners but zinc and aluminium are expected to show a small increase. The report stresses that the main risk on metals prices is a sharp slowdown in the Chinese economy but adds that this is a low probability.

A recent report on Bloomberg indicated that Morgan Stanley have since cut their commodities outlook on Chinese demand. The bank has reduced its 2015 estimate for nickel by 23% , lowered copper by 16% per ton and iron ore by 28%. They also cut their forecast for aluminium prices by 12%. Looking further ahead to 2016, Morgan Stanley cut its 2016 outlook for copper by 14% with output exceeding demand by 230,000 tons this year. It’s also worth noting that the London Metal Exchange’s gauge of industrial metals touched a five-year low this month.
So where does it leave the auto recycler?
All in all, it doesn’t look like prices are going to get better in the near future and could get worse but on the other hand, hopefully we are near bottom. One key concern for the auto recycler if prices do continue to drop to a level where the cost of environmental processing ELVs exceeds the return is, who pays? If this were to happen then the proverbial ‘xxxx’ may hit the fan. After all, the car manufacturers hold the ultimate responsibility but they have managed to side step that responsibility and dump it our door. What this means is that further significant drops in metal prices may be far more onerous than simply killing your profits!
Separate your non ferrous
On the bright side, non ferrous metals, particularly those we handle don’t seem to have much more decline in them and it would make sense to capitalise on the content to be found in each vehicle. I don’t know who coined the phrase, ‘the urban mine’ but it describes an ELV pretty well. Over the past couple of years we have seen a number of attachments designed to help separate the different elements of a vehicle and many dismantlers are now capitalising on added revenue streams from non ferrous materials.
Look harder at your parts
The other key area we can capitalise on is parts sales. We have looked many times at the potential of green parts sales for the repair sector and maybe the current state of metal prices should make us think harder about this potential. ABP (Auto Body Professionals) have surveyed over 1,500 bodyshops of all sizes, franchised and non-franchised, single site and multi-site to assess the attitude of the body repair industry to recycled parts. The results are due out shortly and we shall cover this next month.

Some of the industry are ahead of the game. For example, Hills Salvage & Recycling will be at this year’s Autobody and Motor Claims Expo in Manchester. The show will be the largest and most comprehensive event staged in Britain for bodyshops, motor insurers, accident management companies and associated suppliers. We have spoke of this huge potential before and there’s no reason why you can’t be part of it. All in all it could make low metals prices no more than an annoyance!

April 2015

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