Automotive Salvage Trends September - October 2009

Transcription

1 In the first three quarters of 2009, Insurance Auto Auctions has seen dramatic improvements in buyer participation and selling prices. January through September of this year was very successful for IAA, marked by increased volumes, improved proceeds trends, and record setting buyer attendance. IAA continues to see exceptional results from investments in the Hybrid Auction Model combining live and live online auctions. The US economy continues a slow and tepid recovery. However, there is a growing debate as to the speed of the recovery that may stem from the fact that the economy is not uniformly improving across the country. The Associated Press monthly analysis of economic stress in more than 3,100 US counties found the economy changed little in October compared with September stated NPR.org. The AP s Economic Stress Index calculates a score from 1 to 100 based on a county s unemployment, foreclosure and bankruptcy rates. A general rule of thumb is a score of over 11 indicates stress. The AP s report indicated that not all areas across the US are scoring the same. For example, Nevada, hit hard by the real estate collapse, had the highest statewide Stress score of over 21, while states including South Dakota, Nebraska, Vermont and Montana all scored under This all indicates, stated NPR.org, that some parts of the country will see improvement ahead of the national rebound. In addition, any US economic expansion realized recently has yet to translate into jobs. October produced an unemployment rate of 10.2% reported the NYTIMES.com, the highest rate in 26 years. However, the rate at which jobs are disappearing is slowing significantly continued NYTIMES.com. September October job loss average fell to 188,000 versus over 645,000 monthly between November 2008 and April SCRAP METAL WHOLE CRUSHED AUTOBODY October produced the highest average price for a whole crushed auto body since October of In fact, the October average of $191 per ton is a 54% increase over the January 2009 price of $124 and a 165% increase over December 2008 low of $72. The United Recyclers Group (URG) along with the University of Colorado completed a study on the benefits of automotive reuse and recycling state AmericanRecycler.com. The study found that the simple recycling of steel fenders each year in the US saves the mining of over 5 million tons of iron ore, nearly 3 million tons of coal and over 250,000 tons of limestone. And, the recycling of aluminum from wheels for one year would provide energy savings that could power Chattanooga, Tennessee or Panama City, FL for an entire year. FIGURE 1 Crushed Autobody Avg. per ton Jan 2008 Oct 2009 Data American Recyclers

2 PLATINUM AND ALUMINUM PRICES Aluminum prices moved up again increasing to $0.88 per pound or 46% more than February s low of $0.60 per pound. According to Purchasing.com, aluminum mill product shipments from the US for the first 10 months of 2009 are 41.1% lower than the same period in The price per troy ounce for platinum continued to increase. The weekly average for September was approximately $1285 and for October approximately $1328. The continued strength of the metal is largely tied to the demand from China. The year 2009 was an auspicious year to get married in the country, stated ComodityOnline.com, given the number nine implies forever love. Sales volume of platinum for the first half of 2009 was up over 81 percent from the same period last year. FIGURE 2 Aluminum Avg. USD per pound Jan 2008 Oct 2009 Data LME Cash FIGURE 3 Platinum Avg. USD per ounce Jan 2008 Oct 2009 Data London Daily Close Weekly Average 2

3 US Dollar value The US Dollar has taken quite a tumble, down 18% against the Euro in the last 12 months. And, according to the Washington Post, mounting concern abroad over the shrinking dollar underscores how exchange rates have emerged as a growing source of friction, with many countries jockeying for the weakest currency to boost exports and protect their markets from foreign competition. In fact, companies based in other countries such as Nestle (based in Switzerland) stated the Washington Post, are now contributing revenue declines to exchange rates against the US Dollar versus shifts in demand for their product. Finfacts.com indicated that the Economic Climate for the Eurozone improved through the third quarter. Ireland is the only country of the 16 that is seen as worsening over the next six months. The World Economic Survey experts remain cautious in their expectations, although less cautious than in previous quarters. Mexico s rate of decline in consumer confidence slowed in September stated LatinAmericaMonitor.com. In addition, the growth in the country s consumer confidence, customarily a reliable precursor of movement in retails sales, indicates an expected uptick in retail sales. The only challenge for Mexico s economy continues to be the weak recovery in the US which suppresses demand for Mexican manufactured products. CICNEWS.com reported that Canada s major banks are reporting profits for the third quarter of 2009, indicating a sign of recovery for the country. And, the Canada Mortgage and Housing Corp (CMHC), the federal housing agency, said that the housing market is expected to rebound over the last few months of Analysts are saying that all of the signs show not only that Canada is recovering from the economic downturn, stated CICNEWS. com, but is expected to grow in Japan s currency appears strong, but the question posed is how much debt the country can carry before the nation s economy and currency value break. The NYTimes.com stated that the country s gross public debt is twice the size of its $5 trillion economy, and just paying interest on this debt consumed a fifth of the country s budget for 2008 compared to the US debt payments which composed about a tenth of our budget. The continued weak US Dollar versus other currencies continues to provide foreign salvage buyers with more purchasing power and potential demand which may result in continued stronger returns. The charts to the right illustrate the year to date currency exchange rate of the US dollar against the Euro, Mexican Peso, Canadian Dollar and Japanese Yen. FIGURE 4 USD Compared to Major Global Currency OANDA.com USD Euro USD Mexican Peso USD Canadian Dollar USD Japanese Yen 3

4 US AVERAGE GAS PRICE AVERAGE USED CAR PRICE Gasoline prices jumped nearly 18 cents the last two weeks of October stated CNNMoney.com. This is the first two-week rise since early August. Although there was no significant increase in demand for crude oil, nor large decrease in supplies, the per barrel cost jumped to $ CNNMoney.com further stated that both future perceptions and traders fear of a weakening dollar are most likely contributing to the increase barrel prices. The used vehicle market continued to experience softness in October as it did in September stated the October 2009 edition of Kontos Kommentary. Although used vehicle prices moderated in October according to their usual seasonal pattern, average prices fell more than usual indicating that some dealers continue to be cautious about stocking their used car lots. Kontos expects vehicle demand to strengthen given the tight used vehicle supply created from low levels of new vehicle trade-ins, depressed rental vehicle sales, and declining off-lease and repo volumes. These supply-demand conditions, states Kontos, will support used vehicle prices as we enter the holiday season and next year s tax season. FIGURE 5 US Average Per Gallon Price USD Jan 2007 Oct 2009 FIGURE 6 Average Used Car Price USD ADESA Jan 2007 Oct

5 Salvage Index 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 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