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Tuesday, May 20, 2008

Surging prices spur scrap metal business

Few used cars appreciate in value from year to year, but junkers lately have proven an exception to that rule.
Growing international demand for steel and other metals has sent scrap markets soaring this year.

Brian Haluptzok, owner of Hi-Way 210 Auto Parts west of Carlton, said he’s paying up to three times what he did last year for salvage vehicles.

“A few years ago, I would pick them up for free. But last year, I started paying about $50 per vehicle,” he said. That would be a bargain price today. Haluptzok has paid as much as $200 for some high-value larger vehicles this year. Jerry Chesney, owner of Chesney Auto Salvage in Fredenberg Township, now pays anywhere from $50 to $200 per scrap vehicle, depending on size and condition. His current average is about $100 per vehicle.

And the higher prices have brought more vehicles to salvage/recycling operations this year.

“Every spring, we typically get busy. But this year, people are really cleaning up their yards,” Haluptzok said. “I think it took a little while for the public to realize prices had gone up so much.”

Dealers say competition for salvage vehicles has been intense at times.

Ryan Haluptzok, Brian’s cousin and owner of Classic Towing and Recovery, a Twin Ports business that has dealt in salvage vehicles for eight years, described the year as “astronomically crazy.”

“When the market rises like this, people come out of the woodwork,” Ryan Haluptzok said. He began to notice a surge in small independent operators late last year.

Some of the newcomers essentially have been backyard operations operating under the radar of regulators, said Jennifer Worth, co-owner of WE Recycle of Ashland.

Automotive recycling facilities should be licensed by the Department of Transportation, and Department of Natural Resources permits are required for businesses that dismantle vehicles, she said.

“Basically, we recycle everything, but we’re required to have the proper equipment and systems in place to handle things like freon, oil, fuel and mercury switches. If no one is watching these backyard operations, we need to be concerned about where all this stuff is ending up,” Worth said.

She noted that unlicensed scrappers don’t bear the expense of permits and other overhead costs that legitimate businesses do, giving them lower costs and the ability to bid up prices for defunct vehicles.

“We’ve seen a big spike in complaints about unlicensed operations since the market started to heat up,” said Mark Harings, an auto and salvage sector specialist for the Wisconsin DNR.

Jim Anderson, a fraud investigator for the dealer section of the Wisconsin Department of Transportation, said his office also has received more complaints this year. But he said that enforcement has been a challenge.

“Someone puts a classified ad in the paper — ‘Will pick up scrap for cash’ — and they can come and be gone in a heartbeat,” Anderson said, noting that many of the best tips his office receives come from licensed salvage operators. “To a large extent, we rely on the attentiveness of others to help us,” he said.

Michael Wilson, executive vice president of the Automotive Recyclers Association said he’s not surprised to see opportunists entering the scrap business.

“It has been a real active market because the price of scrap has doubled since November,” he said. “There’s been a sort of gold rush.”

“We’ve never seen prices like this before,” said Bob Garino, director of commodities for the Institute of Scrap Recycling Industries Inc. If developing nations continue to grow at the current pace, he predicts scrap prices could go even higher.

Brazil, Russia, India and China have demonstrated a voracious appetite for scrap metal, he said. He identified Turkey, Dubai, Korea and Taiwan as other large consumers of scrap.

“As these countries develop, they need things like iron, steel, copper and aluminum. They’re also looking for the cheapest material they can find, and that’s scrap,” he said. The United States is a natural source of this scrap metal, Garino said, as it offers an unparalleled supply, from the standpoint of both quantity and quality.

Duluth News Tribune - Duluth,MN,USA

Monday, May 12, 2008

Ticking the Box

It was supposed to put recycling at the forefront of new car design. It was meant to make scrap yards separate harmful substances and recycle more material from cars that had reached the end of their lives. And it was billed as the solution to Britain's illegal dumping problem.

Yet five years after the End of Life Vehicle Regulation came into force, the government has no idea if these aims have been realised. That's because more than half of Britain's two million scrap cars are going missing, thanks to a loophole in DVLA records and a recycling sector that is poorly policed by the Environment Agency.

According to BERR records, around 685,000 Certificates of Destruction (CoDs) were issued in 2006, the first year in which data was collected. A further 215,000 Notices of Destruction (NODs) were sent to DVLA, meaning 900,000 cars were treated under the new rules.

That means up to 1.1 million cars have vanished from the radar. No one knows how many of these have been dumped complete with tyres, oils and with un-deployed airbags intact.

Government is concerned; car makers and the recycling industries are angry.

Seven years ago, it was a more visible problem. With scrap metal prices in the doldrums, illegal car dumping was at its height. Government estimates put the number of burnt-out and abandoned cars at 340,000 cars every year. The Regulation would end this national eyesore, we were told.

Across Europe similar end-of-life rules were implemented, with the same aims; to deliver a reduction in pollution - cars would have to be 85 per cent recyclable by 2006 - and to send less harmful waste to landfill.

Manufacturers were dragged kicking and screaming into a brave new world of partnership with the scrap sector. It was to be an era in which the polluter paid for recycling their products, not the end user, and where scrap yards would be regulated and licensed. Predictably, car makers warned of a huge cost burden.

Consumers would play their part too. Under continuous licensing principles, only a Certificate of Destruction would end the obligation to pay road tax, forcing owners to licensed treatment facilities where de-pollution and recycling would take place.
That was the theory. Only, the system has proved as watertight as a hole-filled bucket because owners don't need a CoD.

Alongside, dismantlers, scrap yards and shredders, they can simply de-register their car by ticking a box on the V5 form and returning it to DVLA. Valuable metals like steel and aluminium can then be plundered, without any come-back for them or the last owner.

This anomaly was raised with DVLA in an angry letter by motor trade bodies and the recycling industry as long ago as December 2006. DVLA responded saying that a review was 'under consideration'. Presumably it still is because in 2008 the tick boxes remain.

Like car makers, dismantlers and shredders are irritated. Scrap car traffic is far lower than they were led to believe and many are struggling to justify the investment to upgrade their facilities. Some share concerns privately held by BERR that the Environment Agency has been unwilling to police an industry it was so anxious to regulate at the turn of the millennium.

Meanwhile scrap prices remain high and the profile of the problem low. Dumped cars are quickly snapped up by those for whom the insatiable appetites of China and India presents an opportunity. Were scrap metal prices to plummet - always a long-term possibility - towns and countryside could once again be blighted with burnt-out cars.

The good news is that completing the end-of-life circle would be easy were DVLA to remove the offending tick box on V5 forms. Customers could be forced to used licensed Authorised Treatment Facilities (ATFs), driving more traffic and encouraging more dismantlers and shredders to invest in the necessary infrastructure to compete.

There would also be less pollution, more recycling and more accountability to government. Which was surely the point of the legislation in the first place.

Clean Green Cars

Friday, May 09, 2008

Economy drives increase in totaled vehicles, cut in auto recyclers' inventory

Economic pressures have converged on the automotive industry to create a condition that's difficult to swallow for many recyclers and collision repairers. Expensive vehicle technology, an increasing number of foreign repairers, and the rising cost of scrap metal add up to more totaled vehicles, said John Fischl, a longtime automotive recycler in Phoenix and a participant in the United Recyclers Group (URG) and Premium Recycled Parts (PRP).

Those market conditions have prompted insurance companies to total many more vehicles, Fischl said. What collision repair shop owners may not recognize, however, is the reverberating effect those totals have on their business.

"What's disturbing is that most shop owners don't realize that the total-loss situation has created a counterculture of underground repairers," Fischl said, adding that vehicles totaled in the United States are being exported to places in Europe, Asia, and Latin America for cheap repairs.

As totals continue to leave the United States, that means less work for legitimate collision repairers and less inventory for recyclers wholesaling parts, Fischl said, adding that acquiring inventory for his yard, Riteway Auto Parts, is becoming increasingly difficult.

That trend results in even more totals because of a lack of available used parts, forcing estimators to write repair orders with higher-priced OEM or aftermarket parts, he said, causing many repairable vehicles to be totaled, thus perpetuating the cycle.

Competition at the auction
Insurers look to recoup money from total losses at salvage auctions, where automotive recyclers are seeing increased bidding competition from the public and international black- market repairers, Fischl said. In the past, recyclers acquired inventory at local auctions, reviewing hundreds of totals, with approximately 25 percent of them being repairable, he said.
Today competition is fierce, he said, and that percentage is far greater. "Recyclers today are previewing thousands of vehicles at auctions in many states to get the inventory they need to survive.

"We're having difficulty getting cars for inventory, which reduces the supply of good reusable parts," Fischl said. "For the collision repairer, there's risk with sending a repairable vehicle to the (salvage) pool." That sale of a repairable vehicle to a rebuilder or exporter creates greater demand for additional total-loss vehicles, driving their price up, he said.

"You're empowering the competition to cause the next total," he said, because those vehicles are being repaired at 50 percent the cost of the original estimate, they're sold at a profit.

The rebuilder or exporter returns to the auction the next week, ready to buy more repairables, causing the price of totals to continue to rise, Fischl said. "As the total loss threshold drops, the collision repairers lose more repairable vehicles to the salvage pool."

Keeping valuable components salable
"We as an industry cannot stand by and watch components be legislated out of the repair market," said Sandy Blalock, president of the Automotive Recyclers Association (ARA) and owner of Capo's Truck & Auto Parts in Albuquerque. "We're constantly vigilant on keeping pace with the industry."

For example, Blalock pointed to the federally mandated testing required to resell used catalytic converters as an example of legislation that negatively affects recyclers. Current market prices for precious metals, such as the platinum found in catalytic converters, have offset this, however, she added.

A salable item in many totaled vehicles is nondeployed airbags, Blalock said, asserting that they're just as safe as new OEM airbags.

ARA's nondeployed airbag protocol
Jeff Kantor, ARA's chairman of the nondeployed airbag committee and owner of CarWorld Used Parts in Candia, N.H., has been instrumental in developing a nondeployed OEM airbag protocol that resulted in a program now run by Airbag Resources. The inspection and training program for recyclers who resell airbags operates under ARA Product Services LLC, he said.

The accepted use of nondeployed OEM airbags could keep a lot of otherwise totaled vehicles in collision repair facilities, Blalock said, adding that the price difference between nondeployed airbags and new ones can be anywhere from 40 to 80 percent. Since insurers and OEMs do not accept the use of nondeployed airbags, she said, they're mainly being sold to rebuilders.

"There has never been a report of a nondeployed airbag sold in the industry that's had a failure," she said, adding that airbag systems in vehicles have a self-diagnostic capability that catches problems.

ARA Product Service's Web site gives recyclers access to software applications, airbag training, access to hazardous-materials certification, and airbag inspection, Kantor said.

The Web site contains an airbag recall check database, Blalock said. "A user can input the VIN in the database to make sure there are no problems with the airbag before it goes into commerce," she said. "It also assures the customer that they're getting the exact match for their vehicle."

Kantor said the protocol covers the airbags sold by ARA airbag protocol trained and certified recyclers, which are branded with the ARAPro logo, assuring repairers that the airbag they purchased meets the standards required by the ARA protocol. He pointed out that the protocol does not cover wires, the airbag computer, or connectors.

Greater profits, reduced cycle time
"Collision repair shops sell two things--parts and labor," says Jerry Cathcart, general manager of Autoworks International in Thornton, Colo. "To truly understand where money is being made, you have to know where it's coming from," he said.

Instead of simply looking at the gross profit margin on a repair, Cathcart said he narrows profitability down to the gross profit margin on parts and the type of parts used. It's this knowledge, he said, that inclines him to use aftermarket and recycled parts in each repair.

Cathcart said his gross profit margin on recycled parts for the first quarter of 2008 was between 26.5 and 27 percent, up to 5 percent more profit than OEM parts. In addition, he said he uses recycled parts to reduce cycle times since the delivery service by local and regional recyclers is quick. "You can get parts the next day," he said, adding that they usually come with extra parts, such as a door with a good lock rod and run channel.

April People & Parts

Northwest recyclers doing good job in their battle for compliance, officials say

Seattle-Automotive recyclers and dismantlers throughout the Northwest region have, by industry and government standards, become exceedingly more professional in their recycling operations as well as more environmentally friendly in recent years, observers say.

Local, state, and federal regulations in the past 10 years have raised the bar, forcing many recyclers to alter their internal methods of handling automotive dismantling, and most firms today are seen to be in compliance with environmental issues. Much of that credit is given to state trade associations as well as the national Automotive Recyclers Association (ARA).

In Washington state, for example, the Department of Ecology (DOE) has acknowledged the Automotive Recyclers of Washington (AROW) for its efforts that have resulted in the collection of 45,000 light switches that contain toxic mercury.

"Washington was one of the first states in the nation to establish a program to remove toxic mercury light switches from salvaged vehicles, and it's an important effort in our overall strategy for keeping mercury out of the environment," said Darin Rice, who manages DOE's hazardous waste and toxics reduction program.

The Washington program began in June 2006 in an agreement with AROW and the End-of-Life Vehicle Solutions group, an organization of automakers that at one time used mercury switches.

Gary Smith of the Independent Business Association, whose group works closely with AROW, said the program has been a major recovery process and that the effort has earned AROW special recognition from DOE for establishing the nation's fifth-highest recovery state for mercury switches.

"The mercury switch collection program is an outstanding example of a win-win industry and government partnership," said Don Phelps, president of AROW and a Kent auto recycler.

In Oregon, the Northwest Automotive Trades Association (NATA) has been a leader in urging its members, including recyclers, to collect switches.

"NATA and ARA have placed a lot of focus on collecting mercury switches in our state," said Mary Ann Trout of Hillsboro Auto Wrecking, an activist in recycling and environmental issues.

Trout said recyclers in Oregon who participate in the collection program place the switches in a container provided by ARA and return it to a predetermined point with a provided UPS return label.

Maintaining clean operations at recycling facilities has been a major issue in recent years for a variety of local and state agencies, especially those that regulate water systems. Storm drain restrictions and regulations have become more stringent, and Smith said that new stormwater permits will be required in Washington, a rule that directly effects recyclers.

In Oregon, Trout said new storm drain regulations require testing four times a year and that new permits are required every four years. She said recyclers have to send their quarterly water tests to a lab, keep the reports from the lab on file, and send the results to the Department of Environmental Quality (DEQ) each July.

Trout also said that scrap-metal issues are being reviewed in Oregon with the construction industry and other fields to determine if stolen metals and copper are being sold illegally to metal recyclers. "Because of the term 'metal,' the state is looking at auto recyclers for possible regulation."

Smith also said that AROW and recyclers need to be aware of the common problem areas found in visits by ECOSS (Environmental Council of South Seattle). ECOSS looks at environmental and economic issues facing businesses.

With complex issues facing recyclers, Smith said that AROW and DOE have workshops planned to review many of the needs and regulations that recyclers and dismantlers will encounter.

April Parts & People

Tuesday, May 06, 2008

Recyclers raise the bar

A national Code of Practice will establish minimum standards for auto recyclers and level the playing field in favor of environmentally-responsible operators.

Prompted by the federal government’s National Vehicle Scrappage Program announcement, the national association of automotive recyclers is developing a voluntary Code of Practice. This document will outline the minimum standards for compliance and best practices for recycling end-of-life vehicles.

Generally in the recycling sector, licensing is the purview of the municipality and there is little enforcement of municipal by-laws. What’s more, there is varying interpretation of provincial environmental regulations, all of which creates an uneven playing field for respectable businesses.

In addition, explains, Steve Fletcher of the Automotive Recyclers of Canada (ARC), “the laws are silent on some of the materials we handle like mercury switches.”

“The Code of Practice helps to bring some structure to our industry. For us, it will be a guidebook for recyclers to build their businesses around best practices,” he comments.

The impetus for the national Code of Practice is the federal government’s promise to develop a program to encourage Canadians to get their old vehicles (pre-1995) off the road. In the 2007 federal budget, a national vehicle scrappage program was announced. Six million dollars was allocated for infrastructure, and another $30 million promised for incentives to get Canadians to scrap their old vehicles. The scrappage program will likely be based on Car Heaven, a voluntary program which encourages Canadians to donate old vehicles for recycling in exchange for incentives.

To accompany the national scrappage program, Environment Canada requested that the industry develop a Code of Practice to ensure consistent practices across Canada for this initiative. The Code will also ensure vehicles are retired in an environmentally responsible manner.

The Code of Practice will establish the requirements to participate in the scrappage program.

“We will end up with a national document that allows the provincial associations to take it back to their governments as a model,” says Fletcher.

British Columbia is currently implementing regulations for its recycling industry. The new rules stipulate that a recycling facility or an association must have an environmental management plan in place by Sept. 2008. The plan describes how waste is removed, stored, treated, or disposed. Facilities must register with the governing body and must be report their compliance every 2 years.

One benefit of the British Columbia document, says Fletcher, is that it helps various government departments to understand the industry better, and it minimizes varying interpretations of laws as they apply to recycling.

It is expected that the vehicle scrappage program and the Code of Practice will create a registry of sorts, as recyclers sign up to be part of the program.

Fletcher says the industry welcomes both the scrappage program and the Code of Practice. “For the most part, our members are already doing this stuff. For those outside the association or even those within who aren’t, we’re hoping there’s a regulatory burden put on them. There’s a really un-level playing field out there right now.”

Cindy MacDonald, April Bodyshop Magazine

Stewards of the environment

The Automotive Recyclers of Canada (ARC) is an umbrella organization of six provincial associations, plus SGI Salvage, that represents approximately 425 professional auto recyclers across Canada. Initially formed as a group to share ideas among recyclers, ARC has also taken on a number of exciting national and even international projects:

Car Heaven
Car Heaven operates as a quasi-national vehicle retirement program managed by the Clean Air Foundation in conjunction with ARC and several of the provincial associations. The program provides vehicles for members to dismantle and sell parts from -- which is the mainstay of any modern auto recycling operation. The federal government has announced $36 million in funding to establish a National Vehicle Scrappage Program, which will either use Car Heaven as the medium, or use the learning generated by Car Heaven's successful eight-year history. Either way, professional auto recyclers have been identified as the only logical infrastructure for a successful program. In addition, Environment Canada is funding a proposal to develop a National Code of Practice to support Vehicle Scrappage that, while a voluntary initiative, should go a long way in bringing much-needed structure to our industry.

Mercury Switch Out
ARC also works with the Clean Air Foundation on its Mercury Switch Out Program. This initiative removes the mercury pellet in convenience light switches before a vehicle is crushed and released to the environment. Environment Canada has published a Notice under the Canadian Environment Protection Act making it mandatory for auto manufacturers, who created the problem in the first place, and steel producers, who release the mercury when they melt the scrap from cars, to prepare pollution prevention plans that include funding a national program to remove switches before crushing. We are in the final stages of discussions to make Switch Out a fully funded multi-year national program.

International Relations
ARC has successfully completed negotiations with the Automotive Recyclers Association (ARA) to cooperate on areas of mutual interest. ARA is at the forefront of creating a wide variety of internationally recognized standards for the industry, including standards for damage location and description, and airbag handling. These standards have been openly adopted by ARC and many of its members. In addition ARC, along with ARA and our colleagues in Europe, Japan, and Australia, have conducted three successful International Roundtables on Auto Recycling (IRT), aimed at sharing information and resources on a global basis.

February Bodyshop Magazine