Japan: falling scrap prices impacting ELV recycling

Asia – The sharp fall in steel scrap prices has had a major adverse impact on car recycling businesses in Japan.

Scrap was selling for around Yen 25 000 per tonne (US$ 220) in January last year but had fallen to around Yen 14 000 (US$ 123) by November. Despite a rebound in some regions to Yen 16 000 per tonne (US$ 140) in early 2016, prices remain at historically low levels. For car recyclers depending on steel scrap for most of their income, it is now ‘a matter of life or death’, according to a car recycling group executive.

If prices continue at the present level, it will remain difficult for recyclers to profit from their traditional end-of-life vehicle (ELV) collection and dismantling operations, it is argued. If steel scrap prices fall further and fees for accepting ELVs do not improve, it is thought likely that Japan will experience a recurrence of the illegal discarding of vehicles.

The deteriorating market conditions for steel scrap appear to be affecting ELV collection volumes in Japan. According to the Japan Automobile Recycling Promotion Center, ELV collections in April to September 2015 declined by around 90 000 units from a year earlier to a record low of 1.62 million. Falling scrap steel values ‘make recyclers hesitate to purchase vehicles at auto auctions’, the centre observes.

Active buying by exporters has prompted an increase in trading prices at car auctions, with the result that scrapping a vehicle could result in a deficit. Therefore, recyclers are buying fewer ELVs at auctions.