2016-03-28-07-04-50-4941ef8e4cab6e68a240daa0ed5898bf

Current Scrap Car Prices Per Ton: Not So Sexy

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Last Updated: September 30, 2016

A few years ago cashing in a junk car would net you enough for a weekend road trip. Today you’d hardly get enough to pay for a hotel room. What gives?

Car junkers (including Junk Car Medics) didn’t suddenly start taking advantage of you. We’re facing a big problem: the price of scrap metal has plummeted in the last two years.  The cars that auto junkyards buy that have reached the end of their life are stripped of all materials and fluids and crushed, with the remains sold to a local shredder.  We (and other junk car buyers) can’t get nearly what we could previously. And it’s a lot of work to tow a car, strip it and crush it believe it or not.  Therefore the price we are able to offer to buy cars has reduced greatly.

But why are scrap metal prices suddenly so low even when compared to last years scrap car prices? How does that affect the junk car industry? And what can you do to ensure you get the highest value possible for your junk car? We have the answers.

How does the price of metal affect the price for your junk car?

According to an article on ETF.com, the average car contains 2,400 pounds of steel. The average truck contains 3,000 pounds. That accounts for about 55 percent of the car’s total weight. There’s also approximately 300 pounds of aluminum in the average vehicle.

When a car junker purchases your vehicle, what they’re really buying is the value of that scrap metal. Steel, aluminum, copper and other metals can be sold for cash to scrap metal dealers. Those scrap metal dealers, in turn, sell the metal to manufacturers who recycle the metal and turn it into new cars, building materials, wire, smartphones and other items we use every day.

The price for scrap metal varies based on demand. If car manufacturers aren’t making many cars, the price of steel and aluminum drops. If builders aren’t constructing new homes and apartment buildings, the price of metal also drops.

Right now demand for metal is low and supply is high. That means prices are low. In fact, the price of steel has fallen from $480 per ton in February 2015 to $50 in early 2016. You can see the precipitous drop in prices in this chart from Quandl:

Steel Price in USD from Quandl

Steel Price in USD from Quandl

The trend looks similar for aluminum, although it’s not nearly as alarming, as you can see on this chart from InvestmentMine.com:

Aluminum Prices From InfoMine.com

Why the sudden drop in metal prices? It has to do with what’s happening in countries all over the world.

SEE ALSO:   What’s My Junk Car Worth?

A brief (recent) history of the international metal market

Metal is a commodity (a raw material for manufacturing or food products) that’s traded internationally. That means what’s happening in the world affects the prices. For years China’s economy was growing so rapidly it created high demand for steel, copper, aluminum and other metals. As its economy slowed from a sprint’s pace to a marathoner’s stride, demand for metals has also gone down, says an article on CNN Money.

However, that doesn’t mean China’s production of steel has slowed down. China has huge overcapacities in steelmaking, says Jan Pfeifer with InvestmentMine. “This steel has to go somewhere and now it is going into the world market, where it depresses prices.”

China produces both finished and semi-finished steel, says Nick Tolomeo with Platts, a leading global provider of energy and commodities information and benchmark price references. The semi-finished steel (also known as billet) has been used as a scrap substitute by steel mills in Turkey, the largest overseas buyer of U.S. scrap. Now that they’re opting for Chinese billet, U.S. scrap is left stranded on the east coast.

Pfeifer says the U.S. and EU have imposed huge import tariffs on steel to try and counter the influx of inexpensive materials from China. That’s helping, says Tolomeo, but it will still be a while before the entire U.S. steel supply chain sees sustained market improvement from these measures.

“Any time you’re trying to figure out what China is doing it’s a guessing game,” he says. “They have somewhere around 150 million metric tons of excess capacity. They seem to be getting more serious every day about rationalizing this capacity. But even if they’re serious about that and taking measures, it’s probably two to four years before the U.S. market sees a material impact.”

Thanks to the tariffs, there were slight upticks in the price of steel in February and March. If price increases can sustain themselves through June and July, Tolomeo thinks recent gains in U.S. scrap prices can be sustained.

“Most steel mills are tied pretty closely to the energy industry” because it’s a major consumer of U.S. steel, he says. If oil and gas prices go up and drilling increases, that may also help increase the demand for scrap steel. However, “overall fundamental demand probably won’t recover too much in 2016,” he reports.

The Wall Street Journal calls junk car dealers “the latest victims of the commodities bust.” They interviewed several auto scrap yard owners who confirm they’ve gone from paying consumers $400 for the average car to between $50 and $100. The Institute for Scrap Recycling Industries notes that 50 scrap metals yards have ceased operations altogether. Others have stopped selling cars and are simply stockpiling them until prices come back up.

SEE ALSO:   5 Things to Do Before You Junk Your Car for Cash to an Auto Junk Yard

How to get the best scrap car price per ton for your automobile?

Given all of this, how do you get the highest price possible for your junk car?

You can call around to the various metal scrap yards in your area to see how much they’re paying for cars. But we recommend you save yourself some time and make one call to Junk Car Medics. Although we’re based in New York and can help you recycle your car for cash anywhere in the state, we also partner with junk car dealers in states all over the country. There are junk car lots that participate in Junk Car Medics’ program in California, Colorado, Florida, Georgia, Illinois, Indiana, Michigan, Missouri, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Washington and Wisconsin (see our website for a complete list of cities where we work). Working with Junk Car Medics no matter where you live ensures you get the best deal possible for your junk car.

If there’s no urgent need to get rid of your junk car, you can also hang on to it for a few years. Metal prices will rebound once the world economy picks up again.