coming across the pond has meant, in many instances, severely congested sea- ports on the west coast of the United States, particularly in Southern California. The port of Los Angeles, for example, saw a 94% increase in import traffic over the holidays than in the previous year. Not surprisingly, both the ports of Los Angeles and Long Beach experienced an average anchorage time of eight days in the first quarter of 2021 for ships waiting for an unloading berth.


This additional time at anchor means not only a delay in getting containers unloaded and goods distributed, but also an increase in the cost of the overall transit of said containers. In some instances, the cost of sending a 40-foot container from Asia to the western U.S. has more than tripled in recent years.


Southern California seaports remain the primary point of entry for collision replace- ment parts coming from major manufac- turers like Honda, Toyota, and Nissan and for aftermarket components coming from Taiwan. Data since the beginning of 2020 shows that aftermarket prices have been impacted more than OEM. For example, when we examine pricing for replacement hoods on 2014-2017 Toyota Camrys, we see that the average aftermarket price has increased by 5.11% since Q1 of 2020 but the average OEM price has only increased by 3.49% (Figure 1).


The increase in the cost of bringing parts to North America from overseas is causing many manufacturers to consider on-shoring (moving production domesti- cally) or near-shoring (moving production to a country that shares a land border with the country where final vehicle assembly is to take place) their parts manufacturing


Figure 1: Average Price of 2013-2017 Toyota Camry Hoods (Based on Mitchell Estimating Data)


operations. While such a move would certainly ease the availability concerns associated with global shipping delays, it is likely that companies would experience an overall cost increase due to the significantly higher cost of labor in North America when compared to the rest of the world. Additionally, oil prices continue to climb (up 160% year over year at time of writing) which puts excess pressure on manufac- turers of petroleum intensive products such as steel auto parts and polyolefin bumper covers. The rise in oil also typically means an increase in the value of scrap steel (up almost 100% year over year at time of writing) since it now becomes more cost effective to smelt down scrap for input materials than to manufacture new steel.


Why This all Matters


Auto recyclers will likely be able to increase prices to capitalize on these trends but perhaps not to the same degree as other companies that are reliant on raw materials


References https://www.autoblog.com/2021/05/05/automotive-chip-shortage-explained/ https://finance.yahoo.com/news/u-lawmakers-prioritize-automotive-chips-140809484.html https://www.glossy.co/fashion/californias-ports-expose-the-root-problem-of-shipping-delays/ https://www.maritime-executive.com/article/congestion-easing-at-southern-california-ports https://www.glossy.co/fashion/californias-ports-expose-the-root-problem-of-shipping-delays/


Automotive Recycling


and manufacturing. With the availability and price of new replacement parts in flux, recyclers may be able to take advantage of this potential hole in the supply chain by offering a reliable and consistent source of parts that is much more insulated from global macroeconomic disturbances. Even though recyclers are facing a tighter supply of salvage vehicles along with an increase in the cost of those vehicles, we are at a unique point in time where savvy opera- tors have the opportunity to capture more market share and fill a significant gap in the ecosystem of collision repair both today and in the near future.


Ryan Mandell is Director of Performance Consulting at Mitchell International. He engages with auto insurance carriers to


analyze claims data and identify opportunities for performance improvement. He also works with claims executives to develop action plans to optimize such opportunities and see them through to fruition, and provides continuing consultation to insurance carriers on the most up-to-date trends in the automotive industry. Prior, he worked at Autowrecking.com/B&R Auto Wrecking and with Precision Collision Auto Body.


May-June 2021 // 35


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