Remanufacture, refurbishment, reuse and recycling of vehicles: trends and opportunities

6. Current markets for ELV parts and materials

This section describes the markets for the various parts, materials and components recovered from ELVs. The section first considers the parts and materials arising from dismantling operations before then discussing markets for materials arising from shredder operations.

6.1 Markets for dismantlers

6.1.1 Spare parts reuse, refurbishment and remanufacturing

The sale of spare parts and components is one of the main ways in which ATF dismantlers generate revenue. Markets for these parts tend to be in the UK (with survey respondents reporting 79.6% of sales of internal mechanical components in Scotland and 20.3% in the rest of the UK) with ATFs either recovering items and holding as stock, or only removing items on demand. A smaller number of ATFs reported removing parts and selling to export markets. Further discussions indicate that more parts and components may end up in export markets than the survey suggests. Some of the sales of internal mechanical components (to Scotland and the rest of the UK) are made to refurbishers/remanufacturers of components (there are at least four engine refurbishers and one transmission remanufacturer based in Scotland) or to core parts suppliers who supply internal mechanical components to refurbishers and remanufacturers based outside of the UK.

With recent advances in information technology there has been a rise in the ability of core parts suppliers to link directly with dismantlers. Some advanced systems on the market enable the dismantler to type a registration number into a system provided online. The dismantler will then be advised which components the core parts supplier will guarantee to purchase and the price they will pay for them. Some systems also have the ability to generate stock control bar codes based on the items the dismantler agrees to sell. These bar codes can then be scanned when the core parts supplier picks up the items.

Some dismantlers have invested in their own IT systems that enable them to sell parts and components via their own websites. Others use third party auction sites to reach consumers with the parts and components they recover from ELVs.

Supplies of reused parts and components direct to vehicle service and repair garages are also part of the market for dismantlers. This is particularly relevant for non-safety critical parts and components, such as body panels, wing mirrors, etc. Where parts are classed as safety critical then the likely route to market is via a refurbisher or remanufacturer. The insurance industry is a driver in the use of reused, refurbished and remanufactured parts (also referred to by the generic term, 'green parts') as it offers the opportunity to reduce costs compared to using original equipment from manufacturers or aftermarket parts ^[76] . There are a number of issues around the use of reused parts, which have been highlighted by different parts of the supply chain. For example, the figure below summaries the key issues and potential resolutions to those issues suggested at a recent meeting of industry stakeholders ^[77] :

Figure 38 - Key issues involved in the supply of reused parts and potential resolutions

The reused parts and components have to compete with both aftermarket and original equipment from vehicle manufacturers. Typically, the advantage of reused parts is that they are lower cost than the two other alternatives. The cost advantage is important but, alone, this will not be sufficient to drive the market for reused parts and components. Service and repair garages demand fast (often same day) delivery of parts and components and expect to have a reasonably comprehensive stock list to choose from. The current suppliers tend to be independent motor factors that hold stock for a large variety of vehicles across a number of brands. Alternatively suppliers can be part of a branded dealer network providing parts and components for only one manufacturer.

Dismantlers can either attempt to service garages directly or via existing motor factors. There has been a recent acquisition of a large motor factor chain by a US based vehicle dismantler group. The view of many in the industry is that the next step for this company will be vertical integration with the purchase of one or more vehicle dismantlers in the UK to secure a supply of used parts and components to distribute through the motor factor group.

There have been a number of trials by groups of dismantlers working with insurance companies and their networks of repair garages. One such trial operated in a 'hub and spoke' model of dismantlers. Each dismantler operated as a supplier to the repair garages in their geographical area but was able to source parts and components from other dismantlers in the network. Interestingly, the parts and components supplied in this pilot tended to be items such as glass, bumper mounts, washer bottles, trims and seals (items with high glass, plastic and rubber contents) ^[78] . Feedback from industry suggests that such pilots are ongoing in Scotland.

There are some specific concerns from vehicle repair and serving garages about the use of reused parts and components related to insurance work (in addition to those listed in figure 38). These relate to the payment model used by the insurance industry to reimburse approved garages for repair work they carry out. Insurers derive costs from a database of information about the average time taken to carry out specified repairs. They tend to cost repairs in multiples of six minute units. Regardless of whether a reused or new part is used the repairer will be paid the same. This means that if there are any defects in a reused body panel (for example) the repairer will not be paid any more money. The end customer will, however, not expect to have any scratches, dents, etc, in their vehicle once it has been repaired. Even in the case where potential corrosion is not visible in a body panel, the repairer is expected to offer a warranty similar to that of a new part. They, in turn, are unlikely to be able to pass this risk back to the dismantler. This issue creates a level of inertia in the development of the market for reused parts and components.

Fleet operators and retail repair and service garages need to have confidence in their supply chains' ability to provide the correct level of quality (both product and service). In 2009, the dismantling industry sought to address this need by developing a publicly available specification ^[79] . A workshop was held with representatives of dismantlers, insurers and repairers to develop an outline specification for a relevant standard. Such a specification ( PAS 125) already exists that includes provision for the use of reused body panels. The project did not proceed, however, due to lack of funding for development (approximately £60K).

There are examples of vehicle dismantlers supplying reused parts and components direct to large public sector fleets. A regional police service in England reported a saving of over £100,000 in 2011/12 through the use of reused parts ^[80] . Discussions with Scottish public sector procurement representatives highlighted that Scottish Local Authorities spend between £7m to £10m on parts to service their vehicle fleets (although a proportion of these will be larger vehicles, such as those used for waste collection). It was estimated that wider Scottish public sector annual spending on vehicle parts could be at least double the local authority figure ^[81] . Local authorities can arrange their own supply of vehicle parts for their fleets or use suppliers approved under the Scotland Excel 'Supply and Delivery of Vehicle Parts' framework. The size of the public sector market represents an opportunity for dismantlers to pursue either directly or via existing framework suppliers.

Metal

Steel in the UK has an indigenous smelting capacity of c6 million tonnes against arisings of c15 million tonnes (implying an export figure of c9 million tonnes). As Scotland is now remote from any UK smelting plant, the likelihood is that steel is exported by ship, either in bulk, or containerised in the case of higher value stainless products.

Figure 39, below, shows the main flows of scrap steel exported from the UK to countries within the EU27 in 2011 ^[82] .

Figure 39 - UK internal steel scrap exports to countries within the EU27 (millions tonnes)

Figure 40, below shows the main flows of scrap steel exported from the UK to outside the EU27 in 2011.

Figure 40 - UK steel scrap exports (outside EU27) by country (millions tonnes)

The 2011 total scrap steel exports from the UK to the named 'biggest buyers' is 7.6 million tonnes. It is assumed that the remaining 1.4 million tonnes (based on the earlier estimate of 9 million tonnes exported from the UK) is exported in smaller amounts to a wide range of countries.

Batteries

The lead acid battery ( LAB) is removed as part of the depollution process. These are then stored in leak proof containers and sold for recycling. Some ATFs check the condition of the battery to ascertain suitability for resale (these usually arise from accident damaged/written off ELV's which maybe only a few months old).

The battery is fully recycled by specialist processors (of which there are around five or six in the UK). The battery is split open, acid removed and the plastic and lead are separated. The plastic and lead is then sold for recycling. The current market value of a scrap LAB is £4 per unit. The ATFs may sell directly to reprocessors or via collectors/aggregators in Scotland. Survey respondents highlighted over 30 different buyers of batteries operating in the Scottish market, highlighting that it is well served.

Catalytic convertors

These are removed from ELVs and sold for recycling to specialist companies (the sale may be through a third party for sorting and grading - 25 buyers of catalytic convertors were identified during the survey of ATFs). These specialist companies know which types of catalytic convertor ( CAT) contain the higher value materials such as precious and rare earth metals and, therefore, there are a range of values of each type of CAT.

The final processing company will split open the CAT and remove the contents for further recycling and removal of high value metals. "In the UK, catalytic converters have been used in all petrol cars since 1993, so increasing numbers of catalytic converters are being recycled. Platinum, rhodium and palladium can be recovered for reuse, and there is a good market for this. The ceramic casing can be recovered as a powder for refining" ^[83] . Outside casings are sold for metals recycling.

There are a number of specialist purchasers of catalytic convertors in UK. They may grade them for onward sale or some remove inner materials for processing. There is a UK plant that processes spent ELV catalytic convertors but most appear to send material overseas for processing in Europe and the USA.

Electrical components

In addition to electrical components being reused for spare parts they also contain intrinsic value in the materials they contain (mainly copper). These can be sold unstripped or stripped (with the latter achieving a higher value). Several ATFs use copper granulators (or intend to purchase them, according to the survey) to add further value to this material. The material is sold as a commodity through the well-developed scrap metal networks and could be used either in the UK or abroad. The ATFs surveyed identified 13 different buyers of electrical components. These were a mixture of scrap metal businesses and companies operating in the WEEE industry (with one plastics recycler included in the names provided).

Electronic components

Again, electronic components are sold for reuse, refurbishment and remanufacture as a core part. Although they do contain metals with intrinsic material value, discussions with one large WEEE recycler highlighted that sealed components (cased in plastic) can be difficult to extract value from and that they would have to charge a gate fee to accept components such as electronic control units ECUs. Respondents to the survey did, however, identify nine buyers of ELV electronic components operating in Scotland.

During the research for this project, one ATF provided a sample of ECUs to four specialist WEEE reprocessors for evaluation of the commercial viability of extracting valuable materials. One of these reprocessors is currently running a larger scale trial with ECUs following their initial sampling.

Plastics (hard and soft)

Plastics removal for recycling is technically feasible and there are markets for segregated materials such as bumpers and fascia plastics at rates in the order of £60/tonne for baled material (August 2012 prices) and £0 for unbaled. As outlined earlier, however, there is little incentive to input the necessary work to segregate plastics when the scrap ELV hulk value is above the price available for individual products. It is likely, therefore, that, in the absence of increased plastic recyclate prices, decreased prices from the shredders or regulatory change, that pre-shredder removal of plastic components will remain a niche for some operators, such as vehicle repairers. There is some activity in this area in Scotland as ten buyers of hard plastic and five buyers of soft plastic were identified during the survey of ATFs. Feedback from industry suggests this activity may be related to plastic parts being removed in the expectation they may be sold for reuse but then being sold for recycling when they fail to do so. Some common plastic types (and associated parts) from ELVs are shown in figure 41, below.

Figure 41 - Location of plastic parts in ELVs ^[84]

The main source of plastics from ELV is through processing of ASR, rather than separate removal by dismantlers prior to shredding (discussed below and previously). Due to the current lack of ASR processing plants in Scotland then no plastic is separated (post shredder) in Scotland.

Carpet & textiles

Less than 10% of ATFs remove carpet and textiles from ELVs. Only one 'trade' buyer of this material was identified during the ATF survey, suggesting that most activity in this area is in spare parts.

Glass

Glass is typically only removed for spare parts as removal for the material itself involves issues with different compositions of glass (toughened and laminated) - "glass removed from ELVs is very hard to recycle because the use of recyclates depends on where the glass was situated in a vehicle. It is impossible to recycle vehicle glass with packaging glass due to specific chemical composition" ^[85]

Rubber (excluding tyres)

The ATF survey identified 12 buyers of rubber from ELVs operating in Scotland. The market for this material is similar to that for plastic. Further industry feedback suggests that the removal of rubber parts at the dismantling stage will only be carried out if there is a reasonable prospect of the part or component being reused. The sale of rubber material to reprocessors is thought to be related to the disposal of items intended for reuse but which have not sold. The indicative price is similar to plastic (£60 per tonne baled and £0 unbaled). This is not sufficiently attractive compared to the £125 to £175 per tonne paid for ELV hulks by shredders.

Tyres

These are removed from the wheel as the wheel is made of steel or aluminium and can be sold as metal for recycling. The tyre, if it is of a legal quality, can be resold as a "part worn tyre". These tyres must be marked as part worn and any repairs carried out to appropriate British Standards. Feedback from industry suggests around 30% of used tyre arisings from ELV dismantlers are suitable for the part worn market.

The majority of used tyres, which are not suitable for reuse, are removed (for a fee) by tyre collectors who then either bale or shred directly, or a gate fee is paid to have this carried out. An alternative to this is the export of whole legal tyres for reuse or (if not legal) for energy recovery.

In Scotland the majority of end of life passenger and light van tyres are shredded, mainly for use in energy recovery but a small amount goes for use as an equestrian surface material. Most of the energy recovery takes place in Scotland with a small amount of shred being exported for energy recovery. The remaining end of life tyres are baled for intended use in civil engineering projects. For example, civil engineering projects could include the formation of landfill cells or as a lightweight fill material for roads constructed on soft ground. The market for bales is at an early stage of development and more bales are currently being produced than are used.

In addition to the established processes of baling and shredding there are a variety of other technologies and practices being developed in the UK and abroad including: microbial devulcanisation, pyrolysis and cryogenic in addition to size reduction technologies. There are also new applications emerging, such as anti-scouring barriers on offshore wind turbines.

Wheels

ELV wheels have an intrinsic material value that is higher than the gate price paid for ELV carcasses by shredders. It is, therefore, economically beneficial to remove them. As with other metal parts, these are sold as a commodity through the well-established network of scrap metal dealers. The ATF survey identified 17 buyers of wheels.

Metal

Metal recovered from shredders is sold as a commodity using the well-established scrap metal industry. The major scrap merchants tend to be located near docks to facilitate the shipping of scrap metal to export markets. Earlier figures 39 and 40 provide details of the key export markets for steel scrap shipped from the UK.

ASR

Scottish based shredders appear to mainly focus any investment on the extraction of metals from ELVs. The residual ( ASR) from the end of the process is landfilled at a current cost to shredders of around £68 per tonne and expected to rise to £86 per tonne, in line with the landfill tax escalator, by 2015.

To move to a position of having an indigenous PST industry in Scotland would provide the processing industry with an option with lower transport costs. This would provide options for Scottish shredders to aggregate their ASR for recycling at an economic cost below landfill or the price of transport to facilities in England or elsewhere. Currently, the dedicated shredder residue plants that have been identified have a minimum viable capacity of around 60,000 tonnes to 100,000 tonnes of shredder residue per annum (not ELVs, but the end product from ELV processing after current recycling technology, which includes shredder residue from WEEE). Two of the dedicated shredder residue plants were identified with a minimum capacity requirement of 100,000 tonnes per annum and the capital investment costs of both were approximately £20-25 million. A third plant was identified with a minimum capacity requirement of 60,000 tonnes but no information could be identified on capital cost. As technology develops it may be that minimum capacity requirements and capital investment fall.

An alternative to recycling and thermal recovery of ASR is to use a technology that just uses thermal recovery (with the exception of some recycling of metal fractions from the bottom ash, depending on the system used). During the research for this study, three early stage development projects using plasma gasification were identified. The technology providers behind two of these developments were interviewed and both were confident that a gate fee could be offered to shredders that would be competitive with landfill cost. This potential treatment route for shredder residue has been selected for commercial evaluation in section eight of this report and more detail is provided then.

The recycling of valuable metals has traditionally been a key part of the ELV sector. The valuable metals include:

• Lead - removed mainly at de-pollution stage as batteries come out and wheel weights should be taken off too
• Copper - from radiators (although aluminium is also becoming more commonplace), heater matrices, brake pipes and wiring looms. By extension, from starter motors and alternators that have high percentages of copper in their construction, but need further dismantling. The common practice is for onward sale of these items to metal merchants for further treatment or aggregation. Some bigger operators have considered granulation of copper cable or wiring looms, but the capital cost of suitable machinery tends to militate against the higher returns of copper generated
• Catalytic Convertors - normally removed at de-pollution stage and dependent on the model, these can be valued at anything from £2 to £80 per unit. They contain platinum, palladium or rhodium. One company in the UK was identified as having smelting and refining facilities for recycling platinum group metals from catalytic convertors. As this company also manufacture catalysts, then it can reasonably be assumed that they then use some or all of the recovered material as an input
• Aluminium - from aluminium alloy wheel, radiators and some engine components
• Engine/gearbox components - these realise a higher value than the lighter steel in a car body. £280/300 (for engines) might be expected rather than the baled/ crushed price of £125 - £175 per tonne. Some ATFs remove these but others don't: this can be a function of the available machinery, with larger operators tending to have machines capable of extracting these components

Rare earth elements are used in a wide variety of consumer electronics, permanent magnets and industrial batteries. An earlier section, 4.2.4, highlighted where rare earth elements are present within ELVs. The markets for them are global and they are in high demand due to export controls from China, which is host to the vast majority of world reserves of rare earth elements ^[86] . During industry discussions on the potential for achieving value from rare earth elements, it was noted that there had been reviews carried out by some car manufacturers in relation to the risks to their businesses, in general, and specifically to particular components due to rare earth metal security of supply issues.

One way of alleviating this might be to extract, at the initial dismantling stage, particular rare earth element containing components ( e.g. some motor systems/electronic control systems, etc.). Such reverse engineering is likely to require investment in design at the manufacturing stage and in training of the dismantling industry. This is a potential area where the motor vehicle dismantling sector could be trained and encouraged to extract relevant components. This may be a medium-term approach for possible collaboration with vehicle producers and with any eventual signatories to an industry standard dismantling scheme being required to follow such an approach. Alternatively, a regulatory approach may be needed, albeit that this would have to take account of cross-border implications if practices are not replicated across the EU.