MW: Commodities bust takes heavy toll on scrap-metal industry
PITTSBURGH — Cars are piling up at junkyards across the U.S., as the commodities bust that has already bruised mining and metals companies from Ohio to Australia ripples through another sector: scrap.
As prices for steel, iron ore and other commodities have dropped because of a demand slowdown and oversupply in China, prices for scrap metal have also collapsed.
That is leading junkyard operators to stockpile cars instead of shredding them, stalling the auto-recycling industry and the chain of largely small businesses that make up the U.S. scrap sector, which is a linchpin of the U.S. industrial economy and an $105 billion-a-year business.
Already this year, over 50 metal scrapyards have stopped operations in North America, according to the Institute for Scrap Recycling Industries. U.S. scrap steel exports fell to $4.1 billion last year, down 34% from $6.2 billion in 2014, according to customs figures. The index price for scrap steel in the U.S. has fallen 29% to $203 a ton, from $261 a ton a year ago.
Scrap companies are facing “extreme challenges unseen since the early 1980s,” said Galdino Claro, CEO of Sydney-based Sims Metal Management, Inc. SGM, -0.48% , one of the few scrap firms with a global presence.
