top of page

Platinum Club July '24

Converter-nomics, Understanding Market-Adjusted Converter Prices, & Converter Technology to Mitigate Risk


by Becky Berube


Converter-nomics: In June, the world of precious metals met in Orlando for its annual conference with several renown platinum group metal (PGM) experts discussing, and sometimes debating, the nearly two-year dip in catalytic converter recycling volumes, PGM prices, and the outlook for the future of each. Continued inflation, higher interest rates, the strong dollar, and the ever-increasing Federal Reserve Rate, combined with uncertainty in the world, are bad for PGM demand and consumers that want to buy vehicles. The low PGM basket price amidst increased mining costs, skilled labor shortages, a weakened Rand, increased energy demands, and depleted PGM stockpiles shows that supply will remain sideways for the near future.


Various reasons were given for understanding the downturn in PGM recycling volumes, namely from scrap catalytic converter recycling, a 20-30% decrease in 2022, and another 25% decrease in 2023. The reasons cited include declining prices leading to “hoarding” or stockpiling converters, market saturation or depletion of supply coming from end of life vehicles, economic pressures of inflation leading to the public holding their cars longer, vehicle durability resulting in longer vehicle life, and policy implications like restrictive converter recycling laws leading to less converters entering the supply chain.


One a-ha explanation given for the shrinking recycling volumes was that since the last financial crisis, nearly 20 million less vehicles were produced, 9 million during COVID alone, resulting in 20 million cars that will never be deregistered, or 40 million catalytic converters that will never be recycled. However, the US car parc, or number of registered vehicles year over year, which considers new and used vehicles sales and deregistered vehicles, has grown consistently by 3.5 percent YoY.


What we do know is that PGM prices have changed in the past two years: platinum fluctuating up and down 10%, palladium down 67% since its peak in 2021, and rhodium down 84% since its peak in March 2021. Although some recyclers may be holding some inventory in hopes of a higher price, that is unlikely to materialize in the next few years, the majority of scrap metal recyclers, especially commodity-driven, public companies, with month over month revenue targets, are selling scrap catalytic converters into the supply chain. We also know that electric vehicle sales are increasing, but so are hybrid vehicles which is positive for PGM demand. It appears as car manufacturers trade their net zero mandates for higher emission standards, electric and hybrid vehicles are here to stay but so are vehicles with internal combustion engines. Finally, we know that PGM recycling volumes are set to double in the next 15 years, but if demand does not increase, prices will remain soft.


Market-Adjusted Converter Prices: The outlook above does not appear overly rosy, and the average converter price has come down in the past two years. That said, it can be hard for recyclers to temper expectations and to get excited about converter sales again. A recent supplier review to look at three loads recycled in the past three years on recovery, or assay, yielded very insightful data when adjusted for current markets. See data table


From this data it can be concluded that this recycler’s profile of the vehicles it recycles has not changed very much in the past three years. The average weight per converter is similar. Note that extensive research shows converters are getting smaller in the past 12 years trending downward from 2.2 pounds per converter to nearly 1.5 pounds today, while parts per million (PPMs) are trending upward with stricter emission standards and cold start requirements for hybrids. Most telling on this chart is that the price per pound and the price per unit are near one another, or in a close price range, when adjusted to current market prices. This exercise or review can aid recyclers in both checking the assay or refining results and in checking their own expectations of price.


Technological Advancements that Mitigate Risk: Although the current market value of catalytic converters may no longer be a top-line revenue item, the VIN to converter data can be a powerful resource to mitigate risk when buying vehicles. Most technology platforms for car parts can effectively price 70 – 80 percent of the vehicle, leaving 20 - 30 percent to a plug or fluff number made up mostly of a guestimate on the number and value of the catalytic converters. Depending on the number of vehicles a recycler buys and how competitive their market for salvaged cars, this data can be a game changer. This data is currently available as a stand-alone solution, as well as an integration with ScrapRight and URG Cores, with many more industry integrations coming. Companies can also inquire about API integrations for their custom enterprise solutions.

 

For daily updates on the PGM markets, subscribe to the United Catalyst Corporation daily e-newsletter, the 60-Second Report, TEXT Daily to 844-713-PGMs (7467). To learn more about recycling converters on assay or the United Ecosystem Bid Tool, you can also call an Account Executive at 864-824-2003 or email a specialist at sales@unitedcatalystcorporation.com.


Becky Berube has served the recycling community for over thirty years. Based in Greenville, South Carolina as President of United Catalyst Corporation, she writes a monthly educational column for the industry, and serves on several ARA and ReMa committees. She is a newly appointed Advisor on the US Industry Trade Advisory Committee on Critical Minerals.


She was a recipient of a 2023 South Carolina Women in Business Award and is a mentor in the Women in PGMs program. Additionally, Becky serves as an At-Large Director of the ReMa Southeast Board, Co-Chair of the IPMI Preventing Auto Catalyst Theft Committee, and is on the Board of Directors of the International Precious Metals Institute (IPMI), where she is a past President.


Becky (Temple) Berube |



2 views0 comments

Recent Posts

See All

Comments


bottom of page