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