On and (R)on with Ron Kowalke - Continuing high scrap values a doom indicator

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Tuesday, March 13, 2007

Continuing high scrap values a doom indicator
Posted by Ron

Don't look now, but that restorable 1957 Pontiac Bonneville hardtop you've been wanting to buy as a project car from your local salvage yard may become an I-beam for a skyscraper being built in China as you read this. The demand for scrap metal from overseas countries such and China and India, which are currently experiencing explosive internal growth, has been and will likely continue to be high.

One of the prime targets for the scrap metal industry are salvage yards filled with older vehicles. These vintage cars and trucks have a high metal content, versus the modern cars that have large amounts of plastic in their makeup, and regularly weigh in at a ton-and-a-half or more per vehicle. According to Yvette VanDerBrink, head of VanDerBrink Auctions (www.vanderbrinkauctions.com), who leads the industry in salvage yard auctions and grew up in the salvage industry working at her father's yard, Nordstrom's Automotive (www.nordstromsauto.com) in Garretson, S.D., current scrap metal value is at $165 per ton. What fuels the problem during the winter months, is much of the scrap metal, whether vehicles or other, is buried under snow and not accessible. As supply lessens, the price paid per ton increases. VanDerBrink believes the price will reach $225 per ton before it levels off. Once the snow melts, and more scrap metal becomes available, the price paid per ton should come down. But if demand from overseas buyers continues strong, the value of scrap metal will remain high.

Over the past several years, salvage yards that have catered to the old car enthusiasts have been closing at an alarming rate. The crush value of these yards' contents have allowed the owners of these yards to reap an immediate cash windfall, and no one can blame these owners for making a sound business decision, even if crushing old cars is counter to the mindset of hobbyists who want to preserve vintage iron. This advanced rate of yard closures will continue as long as there is high demand for scrap metal. Among the many threats to the future growth of the old car hobby, this should rank as the most insidious. Without the parts donor cars that salvage yards provide, the only cars and trucks that will be able to be restored in the future are those that have aftermarket parts support, which is a minority when compared to all vehicles produced since the dawn of the motoring age.

The other frustration factor in this plight is there's not much the average old car hobbyist can do to "fight back" against this near invisible threat. The threat stems from the simple supply and demand logic that drives every society steeped in capitalism. Aside from purchasing donor parts vehicles and "squirreling" them away before the crusher arrives at a yard, if scrap metal values remain high many more old car hobby-friendly salvage yards will close. Quoting a famous line from a popular horror movie: "Be afraid. Be very afraid."

3/13/2007 12:14:20 PM (Eastern Daylight Time, UTC-04:00)

Comments [16]

4/25/2007 10:56:02 AM (Eastern Daylight Time, UTC-04:00)

Ron - I agree very strongly with the points you make here. I'd also throw in that your next to the last line "Aside from purchasing donor parts vehicles and squirrling them away before the crusher arrives at a yard..." may, in fact, be the answer to the problem. As an entrepreneur interested in the hobby, would it not make sense to begin simply buying up the old stock found in these yards? If a group of individuals dedicated to the hobby were to begin to do this, our treasure trove of old iron would be preserved. I'd be very interested to know if you are aware of any individuals or groups who may be doing this. As time proceeds, and the tin worm claims even more victims, the supply of cars will inevitably dwindle. Knowing something about economics, I can therefore guaranty that prices for these parts cars will only continue to rise. The question becomes, who will realize this and take action on it, before it becomes impossible to do?

Thanks for the significant contributions you (and the other folks at OCW) make to the hobby.

a loyal subscriber

David Esch |dbeschAT NOSPAMcomcast dot net

5/31/2007 8:41:47 AM (Eastern Daylight Time, UTC-04:00)

Ron and David,

I’m not sure where you live or what you read in your spare time (besides Old Cars Weekly), but you should take a look at your state and local codes and laws. If this doesn’t pertain to you, then you are one of the lucky few, but a majority of us have been struggling for years on this topic.

Unless you have a lot of land with large barns to contain any hobby vehicle (parts vehicle or project vehicle) most of us fall victim of §302.8 Motor vehicles code or something similar. Many states have it and they all read similar to this:

Please be advised that “In accordance with the new Property Maintenance Code of New York State, under Section - 302.8 – Motor vehicles - “Except as provided for in statute or other regulations, two or more inoperative or unlicensed motor vehicles shall not be parked, kept or stored on any premises, and no vehicle shall at any time be in a state of major disassembly, disrepair or in the process of being stripped or dismantled. Painting of vehicles is prohibited unless conducted inside an approved spray booth. This law is subject to appearance tickets and also may include $1,000 (one thousand dollar) per day fine or imprisonment – each day is a separate offense – if violations are not remedied.

With codes and laws like this, the government forces the antique automobiles to the crushers before the hobbyist can work on them.

So “purchasing donor parts vehicles and squirreling them away” or “simply buying up the old stock found in these yards” can be very costly and next to impossible for the average hobbyist with a 2/3 car garage. What need to be done is heavy pressure on historic groups and legislation. If the squeaky wheel gets the oil, the automotive hobby should be able to make a lot of noise!

~Joe Ferrero

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