SCRAP PROCESSORS SMELL A LEMON IN CASH FOR CLUNKERS

From Resource Recycling:

Just two weeks old but already wildly successful, the Senate voted on Thursday to provide an additional $2 billion dollars for the Cash for Clunkers program, which allows qualifying customers to trade in their gas-guzzlers for up to $4,500 towards a newer, more fuel-efficient vehicle. Overwhelming demand threatened to shut down the program early with over 75 percent of allocated funds already spent within a week of the program's launch.

But many auto scrap processors are complaining that the program's mandate that engines of traded-in vehicles be destroyed is hurting their bottom line. Intended to keep clunkers from reappearing on roadways as unregistered vehicles, the program is set up to send a trade-in from the dealership to the shredder as quickly as possible. Sodium silicate is used to foul the engines before the cars head to the scrap heap, often destroying many reusable and re-sellable parts in the process. According to the Automotive Recyclers Association, engines and drive trains account for 60 percent of processors' revenue from a scrap vehicle.

The approval this week of an extension of the clunker program comes at a time of improving ferrous scrap market conditions. Scrap prices rose in both July and August due to improved export demand and a modest upturn in domestic steel production. Low industrial activity this summer has resulted in many scrap yards holding little inventory of processed scrap. Thus, several industry observers are saying that a scrap surge created by the federal program -- estimated by some to be about 400,000 tons -- can be absorbed under current market conditions.