Spring forward: attractive platinum metals group pricing has caught the attention of recyclers who handle scrap converters

Recycling Today,  June, 2005  by Curt Harler

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Robins and daffodils may be signs of the season, but spring also means the emergence of catalytic converters once buried under the snow. It also offers an opportunity to dig up new sources of recoverable silver from medical and water purification applications.

In the northern and eastern areas of the United States and in Canada, winter months can be slow for those accumulating catalytic converters. But come spring, the converters come out of the woodwork, and the platinum and palladium recovery begins in earnest.

"There is more demand than there was a year or two ago," says Bill Morrison of Morrison's Auto, Edgerton, Wis. Morrison's Auto is a founding partner of QRP (Quality Replacement Parts), the auto dismantlers' co-op. Although converters are only a small part of his business (the focus is primarily on re-sellable parts), Morrison has seen a change in this segment of the business.

BIG BUSINESS. Years ago, five or 10 buyers would have been past his operation, looking for converters. Today, they send their converters to an aggregator who recycles them in larger volumes.

"Prices are going up with the volume," Morrison also notes. But for an operation his size, a jump on the average price of a converter from $27 to $35 while nice--is not going to make or break his day.

Still, dealers at all levels have seen a growth in interest in converters.

"We've seen an increase of close to double our volume over the past few months" says Jeff Couture, Prospera Metals Inc., Petrolia, Ontario. Prospera is now handling nearly 10,000 converters per week.

Credit the increased market to several things beyond the weather. The platinum market is stable at an attractive level. This has encouraged bit players to get involved in converter collection. Dismantlers and auto salvage yards are quite aware of the value of a converter and are looking for outlets. Taken together, the converter market is experiencing a boomlet.

"The market has stabilized over the past six months since there are not the swings in platinum pricing," Couture says. "It makes for a much more stable market for everyone."

He continues, "There is enough buying at source levels to accommodate the market." Auto salvage yards and muffler shops remain the key sources. However, the profile of the buyers is changing.

"There have been increases in the number of entry-level buyers--guys who are picking up 50 to 200 pieces per week," Couture says. "More people are calling looking to do business, looking for a place to move converters."

Part of this is because of the increase in platinum prices. Small-timers see the opportunity to make a few bucks. The buzz from those networking out on the streets is that money can be made in converters.

Indeed, at $30 to $35 per converter, cash can be realized. But the days of grabbing some units on the street for $5 or $10 are gone. "The folks pulling material off the vehicles are more educated, more sophisticated," Couture agrees.

Maximizing catalytic converter returns is an area where the QRP group does not have a program. Morrison says the geographic diversity of QRP members, as well as the logistical problems of coordinating payment, make it a hard sell.

"Product from South Dakota goes to a different [destination] than ours," he says. "It is tough to coordinate 25 different owners.

The change in the precious metals content of the converters coming through the recycling stream is easier to mark.

CATALYTIC TUNE-UP. "Indications are that the U.S. auto industry has been transitioning to a greater proportion of palladium in the manufacture of new catalytic converters," says Ashok Kumar, director of A-1 Specialized Services & Supplies, Inc., Croydon, Pa.

Since 2001 (when the price of palladium soared briefly to more than $1,100 per ounce), catalyst manufacturers have had an increasingly strong incentive to switch to a higher concentration of palladium, as the price of the metal has now fallen to less than one-fourth the price of platinum.

Additionally, with the steady increase in new supplies from underground sources and from the growth in recycling, the fears of further supply disruptions have largely abated, Kumar says.

"Above-ground stocks--estimated to be as much as 1 million ounces of palladium--available to the market may further alleviate supply concerns and encourage palladium's long-term use. Moreover, it is generally believed that Russian stocks of palladium may total another 4 to 6 million ounces," Kumar says.

THE EURO-FACTOR. Catalyst manufacturers have attempted to capture a portion of the growing market for diesel engine cars, particularly in Europe, for the use of palladium. Nearly half of European auto production is now concentrated on diesel engines, which currently contain platinum only, Kumar says.

"The use of palladium in at least a portion of the diesel market is deemed inevitable, and any announcement to that fact will probably have an immediate positive effect on the price of palladium and an opposite adverse effect on the platinum price," he notes.