SCRAP METAL WHOLE CRUSHED AUTOBODY

Transcription

1 The decline in the US economy appears to have slowed as indicated by better than expected second quarter GDP. In fact, final sales are now positive at an annualized 0. percent for the second quarter, compared to the initial estimate of a 0.2 percent drop. This follows three consecutive quarters of declines, including a.1 percent decline in the first quarter of One significant occurrence in the automotive industry was the Cash for Clunkers (CARS) Program. Although the shear number of transactions seems large, when compared to the overall number of used cars in operation today, the percentage is relatively small. With its start and end a mere four weeks apart, and a staggering $3 billion in requested rebates, the impact will take some time to materialize. As we passed the mid point in the year, indexes related to the salvage market continued to indicate a recovery. Specifically the Automotive Salvage industry saw scrap prices, metal prices, and average car prices again trend upward while the US Dollar value and gas prices remained in flux. SCRAP METAL WHOLE CRUSHED AUTOBODY August brought the highest average price for a whole crushed autobody since October of In fact August 2009 versus December 2008 showed an over 235% upswing in price. While the average price in 2008 was $226 per ton, May August produced a historic high average of $305. Year to date in 2009, the average is $139, however the August average of $171 is more in line with the overall average for 2007 of $162. Several factors are noted by analysts as the reason for continued improvement in scrap prices including the growing demand for scrap and the tightening of scrap supply in the US Scrap Metal industry. Some analysts feel the CARS program could infuse the market with scrap and parts and have an affect on the price of scrap metal and crushed autobody. As an approved service provider for CARS, IAA will continue to monitor the impact the program has on returns and the overall salvage industry. FIGURE 1 Crushed Autobody Avg. per ton Jan 2008 Aug 2009 Data American Recyclers $00 $350 $300 $250 $200 ZONE 1 ZONE 2 ZONE 3 ZONE ZONE $150 $ $50 $0 1

2 PLATINUM AND ALUMINUM PRICES Aluminum prices continue to tick upwards as marked by the August $0.88 price, an over 7% increase per pound from the February 2009 low of $0.60. Aluminum is the most recycled product on the planet and requires only 5% of the energy to be recycled than to be produced new using raw materials. Platinum continues a steady price increase per troy ounce. The August 2009 weekly average held an over $1200 price consistently, an over 33% improvement from January 2009 averages. Prices for platinum were certainly supported by the increase in car sales and the continued high demand from China noted CommodityOnline.com. As metal prices continue to improve, several states including Oregon and Utah are either putting laws on the books or working with law enforcement to reduce scrap metal theft noted American Recycler in their August newsletter. This trend may drive increased demand from legitimate sources. FIGURE 2 Aluminum Avg. USD per pound Jan 2008 Aug 2009 Data LME Cash $1.60 $1.0 $1.20 $0.80 $0.60 $0.0 $0.20 FIGURE 3 Platinum Avg. USD per ounce Jan 2008 Aug 2009 Data London Daily Close Weekly Average $2, $2, $1, $1, $ Week 2

3 US DOLLAR VALUE The value of the US dollar continues to lose ground. July and August showed continued decline in the US dollar value against all other major currencies. From the middle of 2008 until March 2009 stated CommodityOnline.com, the dollar was a safe haven. But in March, when analysts began to say the recession was over, the appetite for risk increased and the value of the US dollar suffered. FIGURE USD Compared to Major Global Currency OANDA.com Euro European inflation fell by the most in at least 13 years in July stated 0.72 TradingEconomics.com, after energy costs declined and unemployment 0.70 rose to the highest in a decade. Exports from the Euro Zone are hurt 0.68 not only be the weak demand from the US but also by the high Euro Zone wages and strong value of the euro The Mexican economy continued to suffer, and took a strong nosedive stated CNN.com in the second quarter of The gross domestic product dropped 10.3 percent over the same period last year and the GDP for the second quarter also declined 1.1 percent from the first three months of the year. The main cause of these declines is the fact that the Mexican economy is tied strongly to that of the US. Mexican Peso $17.00 $15.00 $13.00 $11.00 The Canadian economy is fairing much better than other countries $9.00 while still feeling the effects of a recession. In an August 29th speech to the Canadian Association for Business Economics the Deputy Governor of the Bank of Canada, Timothy Lane, stated that Canada had moved beyond the gravest dangers of the financial crisis. Lane went onto state that the Bank projected Canada s GDP growth to be a negative 2.3 percent for 2009 and then 3.0 percent for 2010 and 3.5 percent for This economic recovery will be due to several factors, Lane stated, including the country s well functioning financial system and the strong balance sheets of households, businesses and government. Canadian Dollar $7.00 $5.00 $1.0 $1.30 $1.20 $1.10 $0.90 Japan s economy rebounded in the latest quarter (second) for the first $0.80 time in a year reported NYTimes.com. Exports, the country s mainstay, $0.70 fell to half their pre-crisis levels at one point. However, continued $0.60 NYTimes.coom, the outlook for Japan remains unclear. Some analysts question whether the economy can sustain this recovery after stimulus measures at home and elsewhere run their course. Japan s jobless rate hit a six-year high of 5. percent stated NYTimes.com, and wages showed a record drop in June on an annual basis, dragging down consumer spending. Japanese Yen $0.50 JPY JPY JPY JPY The weakening of the US Dollar versus other currencies will increase the purchasing power of foreign salvage buyers at our auctions and may positively impact salvage returns going forward. JPY 9.00 JPY JPY JPY JPY The charts to the right illustrate the year to date currency exchange JPY 8.00 rate of the US dollar against the Euro, Mexican Peso, Canadian Dollar and Japanese Yen. JPY

4 US AVERAGE GAS PRICE AVERAGE USED CAR PRICE July and August delivered dynamic gas prices as crude oil went from over $71 per barrel in June to under $55 per barrel in July to over $71 per barrel on August 3. This volatile movement in barrel prices has produced an equally volatile price at the pump. While the EIA (Energy Information Administration) Short Term Energy Outlook of August 11, 2009 states the group expects average per gallon prices to be approximately $2.3 for 2009, they are projecting the average for 2010 to be $2.66. The rise, fall and subsequent continued rise of gas prices stated the EIA s Short Term Energy Outlook (August 11, 2009) stems from the tension between global economic recovery and persistent weak global consumption of crude oil. The average wholesale used car price was up significantly on a year-over-year basis and down modestly on a month-over-month basis stated the August 2009 Kontos Kommentary by Tom Kontos of ADESA. Retail sales of used cars where flat overall and down slightly for franchised dealers which Kontos related to the focus on new vehicles as a result of Cash for Clunkers. Kontos went on to state he expects now that Cash for Clunkers has ended, the used car market will resume stronger sales as indicated by previous months. FIGURE 5 US Average Per Gallon Price USD Jan 2007 Aug 2009 $.50 $.00 $3.50 $3.00 $2.50 $2.00 $1.50 $0.50 $10,500 $10,000 $9,500 $9,000 $8,500 $8,000 $7,500 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 FIGURE 6 Average Used Car Price USD ADESA Jan 2007 Aug 2009

5 INSURANCE AUTO AUCTIONS, INC. provides the advantage in salvage auto auctions with their hybrid auction model combining live and live-online auctions, North America s broadest salvage auction facility footprint, a strong global buyer base and high vehicle returns. IAA s more than 150 corporate owned facilities across the United States and Canada provide vehicle suppliers and buyers with powerful solutions to process and acquire total-loss, recovered-theft, fleet lease, donation and rental vehicles. The IAA Hybrid Auction Model, including live, live-online, and proxy bidding, united with their mature global buyer base and diverse inventory produce some of the industry s highest returns for vehicle providers. With over 26 years in the industry, IAA holds the most comprehensive warehouse of salvage auction data. For more information regarding IAA visit our website at Edmonton Vancouver Calgary Seattle Spokane Quebec Moncton Portland Missoula Sudbury Halifax Eugene Sacramento Reno East Bay Fremont Boise Salt Lake City Billings Denver Fargo Sioux Falls Omaha Minneapolis/St. Paul Des Moines Appleton Milwaukee Chicago-North Chicago-West Chicago-South Lincoln Grand Rapids Corp. HQ South Bend Detroit Lima Cleveland Columbus Indianapolis Dayton Cincinnati-South Cincinnati Buckhannon Ottawa Burlington Portland-Saco Toronto Manchester Albany Hamilton Rochester Boston London Syracuse Taunton Buffalo Scranton Newburgh Akron- Canton Erie Altoona Harrisburg Pittsburgh-North Pittsburgh Northern Virginia Hartford Hartford-South Long Island Northern New Jersey Central New Jersey Fresno North Hollywood Los Angeles Anaheim San Diego Honolulu Las Vegas High Desert Fontana Colton Phoenix Tucson Western Colorado Albuquerque El Paso Permian Basin Wichita San Antonio Oklahoma City Dallas/Ft. Worth Austin San Antonio-South Dallas-South Corpus Christi Kansas City Longview Houston-North Houston Houston-South Springfield Little Rock St. Louis Memphis Jackson Bowling Green Paducah Moss Point Baton Rouge Nashville Chattanooga Atlanta Huntsville Birmingham Pensacola Dothan Ashland Knoxville Asheville Greenville Atlanta-North Atlanta-East Atlanta-South Tifton Clearwater Tampa Pulaski Savannah Jacksonville Greensboro Concord Charlotte Charleston Richmond Raleigh Wilmington Orlando-North Orlando Miami-North Miami New Castle Southern New Jersey Philadelphia Bridgeport Baltimore Laurel Metro D.C. Tidewater ABOUT THE AUTHOR Jeanene O Brien heads up IAA s Provider Marketing and has over 15 years of experience in the overall property and casualty claims industry. In addition to assisting the IAA sales and service teams, Jeanene focuses on business shifts and economic trends that affect the overall salvage industry. Jeanene s experience includes approximately 10 years leading CCC Information Services marketing department and over five years consulting with claims vendors, including independent appraisal firms, collision repair facilities and integrated technology providers. Jeanene holds a B.A. in English from the College of Wooster (Ohio) and an MBA in Market Research and Advertising from Loyola University Graduate School of Business in Chicago. 5