The catalytic converter industry has been constantly evolving over the last 25 years. Many of you in the scrap industry will remember back in the day when converter buyers would come and purchase with just three grades in mind: small, medium and large. My, how things have changed. We now have over 65 grading categories and 20,000 serial numbers, as well as toll refining as an option to sell converters.
Over the course of our 20-year history PMR has definitely changed with our evolving industry, growing from a specialized converter core buying company, relying on our buyers for converter information and toll refining results, to being one of the leading converter information providers and toll refining purchasers in North America.
[Toll refining is defined as a situation in which the owner of ore or concentrate contracts the refining of the metal to another party for a fee but the refined metal remains under the original ownership for final sale or disposition.]
PMR now sells our suppliers' precious metals, including platinum, palladium and rhodium, directly to end users. We purchase based on the recovered precious metals contained in catalytic converters, and offer an extensive online database that provides up to the moment pricing for more than 17,000 individual pieces.
One of the big questions regularly asked by automotive recyclers is: how does a catalytic converter recycling company value the material it receives from suppliers (mainly scrapyards, auto recyclers and dismantlers, as well as core buyers) and put a fair market price on it for the subsequent sale (mainly to other catalytic converter recyclers or precious metal and ceramics buyers who use the recovered material in manufacturing).The answer to this question is as varied as the companies involved in buying and selling recovered catalytic converters.
Ultimately, the value of materials depends on the technical abilities and knowledge of each company involved. In the end there is only one way to put a true value to scrap converters and that is to de-can, process, sample and assay the ceramic material that is contained inside them.
This process can be complex. There are very few converter companies, such as PMR, that have in-house laboratories. And for some companies, just having a laboratory does not always ensure that converter precious metal values are accurate. Processing, sampling and assaying ceramic catalyst requires that very precise formulas be followed and applied to get the correct readings from lab machines. If the internal assay formulas are not correct, the ceramic or converters can either be undervalued or overvalued. In either case a converter company in this situation cannot stay in business for very long. Inaccurate lab results have put more than one catalytic converter recycling company out of business in the recent past.
Companies that buy converters by the piece and sell to toll refining companies, and that use exaggerated or inaccurate pricing information, have not helped to teach those in the industry about the actual value of converters.
In the case of auto catalyst, the precious metal content comes from the ceramic material inside the converter. Those companies that have gone out of business or needed to be bought out of trouble were either not accurately assaying their catalyst or purchasing converters based on exaggerated assay information. If you were doing business with any of these companies that were rescued or needed to adjust pricing based on more accurate assays, you may have noticed that even though precious metal prices have made a comeback, their price sheets looked about the same.
From the Scrapyard Perspective
From the perspective of the scrapyard owner, things can get pretty confusing, especially when you have been trained by "trusted buyers" that a General Motors Large Bread Loaf is worth X$ and Honda 02 Premium is worth Y$. This is especially so when another "trusted buyer" comes along and offers even more for the same piece, in the same week. How can that be?
There are way too many variables in converters, even those with the same serial number, to put an exact price on a specific piece without toll refining. Some of the variables include, but are not limited to: what state the car was originally sold in; the amount of mileage on the converter; and if the converter ceramic is intact, was the vehicle run at idle for long periods of time? These factors can vary the value of an individual converter upwards of 15 percent, or sometimes even more. Additionally, current market pricing, per ounce, for platinum, palladium and rhodium needs to be factored into the purchase of the converter.
If separate converter buyers are giving a scrapyard owner different prices for the same converter, there are two explanations. One, the first buyer has a reliable database of information and he is an honest broker making an honest living and reselling the material up the food chain. Or two, the second "trusted buyer" has exaggerated the value of the commonly known converters on his price list or number sheet to make the scrapyard owner think that he is paying a higher price for everything else. This, while he only purchases some converters at a premium and the difference is made up on converters where the values are less known.
The truth is that both kinds of buyers are likely to offer a price for the material that is relatively close to the other - within $5 to $10 per unit. This is because there is only a finite amount of precious metal in a given load, which eventually ends up at a company like PMR for real evaluation and payment. Both buyers just graded or evaluated the load differently to show it in the best light, hoping the number they gave looks better or is higher than the "other guy," and that they can somehow still make money. Definitely, these "road" buyers need to take into consideration their time, their truck, the guy sitting in the truck beside them, the facility where they stockpile material and shipping cost to the toll refiner.
To make things even more complex is the fact that a batch of converters will always be different from one load to the next. It is more likely that you could win the lottery than have two identical lots of converters. That is because each converter lives a different life, and a lot is harvested from different scrap cars when the initial recycling process occurs. If you are working with a company that shares with you the information received from the same type converter, analyzed multiple times (like PMR), you will quickly see that even the same converter with the same serial number can have up to a 20 percent variation in its final value.
Toll refining is the answer
Either way, how does a converter company purchasing by toll refining value the material? PMR and other companies who operate similarly will judge the value of converters from the weight of the total processed ceramic that has been harvested, compared to the laboratory results from the assay sample. What does that mean in layman's terms? It means that the converters have been de-canned, the ceramic has been crushed, commingled and a sample of the load has been taken into the lab. Refineries/processors will then analyze representative samples by XRF (X-Ray fluorescence) and ICP (inductive coupled plasma) and determine the value of the total load from the average of the samples.
Industry insiders will tell you that there is a margin of error in these lab samples of roughly +/- 5 percent. It will go up and down from sample to sample, and balances out at the end of the year. Ultimately though, the returns that come from toll refining are and must be substantially higher than those of the converter company that is purchasing material by serial number and grading. The reason for this is evident. The margin of error with toll refining is actually less than 5 percent. Conversely, the company that is purchasing by the piece, without toll refining, must insulate itself from market fluctuations, reliability of information and the knowledge of each of their buyers. This can result in an ultimate price difference ranging from 10 percent to 25 percent less than direct toll refining, depending on the converter buyer.
Still, there are many things to consider when going with toll refining. Questions that arise include: how fast will I be paid for my material? What is the minimum number of converters needed to access a toll refiner? What are the percentages of reclaimed metals being paid back to me? And, what are the other fees involved in this type of transaction? My advice to any yard considering moving to toll refining for their processing of catalytic converters: carefully interview and evaluate the companies offering these services.
From this insider's perspective, there is really only one way to get the best return for your catalytic converters, and that is toll refining.