November/December 1991
Recyclers of automotive catalytic converters expect the “environmental ethic” of the 1990s to stimulate demand for platinum-group metals for new catalytic converters and boost the autocat recovery industry.
By Kent Kiser
Kent Kiser is associate editor of Scrap Processing and Recycling.
Compared with most other scrap materials, automotive catalytic converters--or autocats--are a newcomer on the recycling block; autocats were first installed on American cars in 1974. Since then, the recovery of platinum, palladium, and rhodium--platinum-group metals--from autocats has made impressive strides. Last year, the autocat recycling industry worldwide reportedly recovered more than 300,000 troy ounces of platinum-group metals worth more than $160 million, with North America accounting for 80 percent of recovery.
Like all metal commodity industries, however, autocat recyclers have fallen victim to the current recession, experiencing lower metal prices, excess supplies, and spotty demand. Nevertheless, as one industry source notes, platinum, palladium, and rhodium are "environmental metals," which guarantees them--and autocat recyclers--"a future in the 1990s."
Creating a New Scrap Market
The first autocats--introduced in the United States to meet Clean Air Act standards--were oxidation catalysts that used platinum and palladium to convert hydrocarbons and carbon monoxide in car emissions to carbon dioxide and water vapor. By the early 1980s, rhodium had been added in significant quantities to catalysts to convert nitrogen oxide--said to be a contributor to acid rain and ozone formation--to nitrogen and oxygen. These "three-way" platinum/palladium/rhodium catalysts have since become the industry standard but have only recently found their way into the recycling stream as later-model cars are retired.
From the outside, autocats resemble acoustical mufflers and are contained in a variety of stainless steel canisters. Inside, the catalyst comes in two basic types: honeycomb/monolith (the predominant variety, accounting for approximately 70 percent of all recovered converters) and pellet. The platinum-group metals are dispersed into the surface or surface coating of the honeycomb substrate or pellets to provide catalytic activity.
Autocat recycling began in the late 1970s but it has only been since the mid-1980s that converters have been scrapped in large quantities. In the few years since then, the autocat recycling industry has grown quickly, and each year more and more precious metals are recovered. In 1990, approximately 210,000 troy ounces of platinum were recovered worldwide from autocats, an increase of 20 percent compared with 1989, while palladium recovery rose 15 percent to 80,000 troy ounces and rhodium recovery reached 11,000 troy ounces, according to data compiled by Johnson Matthey (Wayne, Pa.).
Despite the steady increase in recovery, there is room for improvement: Only about 60 percent of the platinum-group metals originally incorporated in the converters of cars scrapped in the United States last year was recovered, says Ashok Kumar, co-owner of A-1 Specialized Services & Supplies Inc. (South River, N.J.). The rest was dissipated during autocat use, lost in the recovery process, stockpiled, or lost along with converters that were shredded or abandoned. "There are losses all along this system," notes Charles Cunningham, an associate with A-1 Specialized Services.
Several factors could increase autocat recovery-precious metal supply disruptions, metal price increases, laws forbidding the shredding of autocats, and increased public awareness of the value of catalytic converters. "I think you'll see small 'increases in recovery each year," predicts Jeffrey Sloan, president of Catalytic Converter Refining Co. (North Lake, Ill.).
How the Industry Works
The primary autocat supply sources are auto dismantlers, muffler shops, auto service stations, and new car dealers, but there is some peddler collection activity. These suppliers/collectors sell to larger collectors and decanners such as A-1 Specialized Services; Bowden Industries Inc. (Covington, Tenn.); Brown Recycling & Manufacturing Inc. (Somerville, Ala.); Catalytic Converter Refining; Converter Technology (Houston); Multimetco Inc. (Anniston, Ala.), formerly Texasgulf Minerals & Metals Inc.; and Parkans International Inc (Houston).
A handful of autocat extractors/refiners the located around the world round out system. Most purchase autocats by the unit or by the pound after the catalyst has been liberated from the canister and recover the platinum-group metals through secondary smelting, usually using pyrometallurgical processes.
The majority of these extractors/refiners are in Japan, Germany, Belgium, England, and Canada. In the United States, Multimetco extracts platinum-group metals, while Johnson Matthey refines them at its West Deptford, N.J., plant, but there is no dedicated autocat refiner in the country. Why? One source says that startup costs and conforming with U.S. government regulations would be too expensive and difficult. Worries about uncertain supplies and competition from existing autocat refiners are also factors. Moreover, existing U.S. secondary smelters that might consider adding platinum-group metals to their roster know that there's plenty of excess capacity in the business," Cunningham says. "The barriers to entry are just higher now."
Some companies that did, in fact, try to operate autocat refineries in the United States ran aground due to supply, management, or technical problems, or because they spread themselves too thin trying to be collectors and refiners, asserts Jerry Adams, vice president and general manager of Brown Recycling.
The lack of North American autocat refining capacity is not a big issue now, but it could become a serious concern if the United States ratifies the Basel Convention on the Control of Transboundary Movement of Hazardous and Other Wastes, which bans signatory countries from importing or exporting precious-metal-bearing materials unless their trading partner is also a party to Basel and the two countries have in place a bilateral agreement covering such shipments.
The Pricing Puzzle
The pricing of autocats is an ever-changing process that takes into account such variables as the type, age, and size of the converter. Major autocat buyers occasionally pay an "average" price for a load of converters, which makes it easy to purchase large lots, points out Jim Webb, commercial trader for Parkans International, but this cut-and-dried method eliminates the buyer's knowledge of the product mix and the profit margin. "It doesn't give you much control over what's coming in," he explains.
Today, most autocat recyclers use a "tiered" pricing system to more accurately reflect the value of the recoverable metal in different converters. (One source estimates that there are 1,000 varieties!) This system requires hand sorting and classifying using various visual, weight, and sound checks, which can be time-consuming on large loads.
In 1990, average prices ranged from $11 to $12 per unit, while tiered prices ran $ 10 to $17 per unit, with pellet converters at the low end and three-way honeycomb at the high end, according to Johnson Matthey. In 1991, average prices have been in the $7-to-$11 range, while tiered prices have ranged from as low as $6 for low-grade pellet converters to $20 for the large honeycomb variety, sources estimate. "The bottom line in this business is that everyone pays the same range of prices," Webb observes. "It comes down to whom you feel comfortable doing business with." He notes that "the supply is getting better in terms of quality of the material" as more three-way converters enter the scrap stream and as more autocats, are recovered in general.
Dealing With a Down Market
The autocat recycling market is inextricably linked to the fates of platinum, palladium, and rhodium. Thus far, the 1990s have not been generous to platinum and palladium. Both metals have enjoyed increases in overall demand, but both have also seen supply outstrip demand and prices drop. Fortunately, demand for platinum and palladium in autocats has increased amidst this downward scenario. Worldwide demand for platinum in autocats, for example, reached 1.52 million troy ounces in 1990, a rise of 65,000 troy ounces over 1989, while palladium demand in autocats hit 3 10,000 troy ounces in 1990, up 45,000 troy ounces, according to Johnson Matthey.
Rhodium had a banner year in 1990, with world demand surpassing supply by 15,000 troy ounces and driving the price above $7,000 per troy ounce for a short time. This summer, however, rhodium prices kicked into reverse, dropping below $3,000 for the first time in more than a year. Webb estimates that rhodium now accounts for only 30 percent of the value of converters his firm handles, compared with 50 percent several months ago.
This year, several factors have affected platinum-group metals in general and the autocat industry--both primary and secondary--in particular:
The worldwide recession, especially the slump in the North American auto industry. "The recession is hurting us worse than anything else, " Adams says. During a recession, car owners tend to hold onto their old cars rather than buying new ones, winch reduces the supply of spent autocats, notes Ellen Zadoff, senior market research analyst for Johnson Matthey.
The falling prices of platinum-group metals, which have made it less profitable for scrap collectors to recover spent autocats. For some small autocat collectors, Webb says, "It's just not worth it to be in the business now at this market level." One industry source speculates that some autocat collectors are hoarding converters, waiting for prices to rise.
The Soviet Union's export of platinum-group metals to Switzerland as collateral for hard currency loans. This move has driven prices down and contributed to pushing platinum and palladium into oversupply. "The Russians have been a very big factor this year," Kumar says. Prices likely will be further eroded if Russia and the other members of the new Union of Sovereign States are granted "most favored nation" trade status, Webb asserts.
An announcement by Nissan Motor Co. that it had developed an all-palladium catalyst that could replace platinum-based autocats. This news put further downward pressure on platinum prices, as did an announcement by Atlantic Richfield Co. that it plans to introduce a new gasoline designed to reduce auto emissions.
Waiting on Future Demand
The present may not be overly rosy for autocats, but the future promises higher demand. Despite sluggish U.S. auto sales, amendments to the Clean Air Act, which will be phased in between 1993 and 1995, will require a 60-percent reduction in nitrogen oxide emissions-good news for rhodium, in particular. In addition, new requirements call for automakers to increase the life span of autocats from the current 50,000 miles to 100,000 miles. Carmakers will, therefore, either have to use higher concentrations of platinum-group metals in their new catalysts, increase catalyst size, or add more catalysts per vehicle, all of which will increase demand for platinum-group metals.
Internationally, the European Community (EC) is also setting stricter emission standards, comparable to 1983 U.S. regulations, which is likely to create a demand for millions of new autocats. Austria, Switzerland, Sweden, Norway, and Germany are already requiring autocats in new cars. Germany also reportedly offers tax concessions to people who retrofit older cars with autocats. The EC will reportedly be adopting even stricter emission standards in 1996.
These actions are part of a worldwide trend of focusing on the environment, Adams says, a trend that will likely eventually touch South America, India, and other developing countries. Mexico and Taiwan now require autocats on all new cars, while Brazil is in the process of implementing tighter emission standards. Despite this positive trend, Webb believes that increased international demand "will take several years to cause any great increase in prices." Sloan adds that the growth in European demand "will be slow and steady, not anything striking." All agree, however, that the international autocat market will grow.
There's another major reason to be optimistic about platinum-group metals: They are virtually irreplaceable in most of their applications, particularly autocats. The industry discounts as fiction the recent announcement by Advanced Industrial Research SA, a South African firm, about the development of a manganese-based catalyst, which reportedly would greatly reduce the cost of producing converters. Sources assert that manganese compounds aren't durable enough for use in autocats.
Nissan's all-palladium converter, which is said to cost a third of normal converters, is a reality and will be installed on some 1994 Japanese cars. Sources note, however, that the converter could not meet the strict U.S. emission standards and is only practical for the Japanese auto market, which uses higher-quality gas that is low in sulfur and lead. Even in Japan, the converters are being used only on the smallest cars.
Despite these positive factors, autocat recyclers are having to wait-for the recession to end, for the North American auto industry to rise from the dead, for new emission standards to increase demand in the United States and abroad. Even as they suffer through the current market doldrums, however, they are confidently eyeing the future, certain that autocats-and platinum-group metals-have their best days ahead of them. •
Recyclers of automotive catalytic converters expect the “environmental ethic” of the 1990s to stimulate demand for platinum-group metals for new catalytic converters and boost the autocat recovery industry.