November/December 2003
The recovery of platinum-group metals from catalytic converters has increased dramatically in the past decade and is likely to continue upward. Here’s a look at what’s driving this recycling niche.
By Robert L. Reid
Though environmental regulations and the scrap industry have at times had an uneasy relationship, there’s one recycling niche for which tougher government rules have been an absolute boon—the recovery of platinum-group metals (PGMs) from catalytic converters that are put on cars to control emissions.
Just look at the recovery figures for platinum, palladium, and rhodium, the three most significant PGMs, says Ellen Zadoff, market research manager, North America, for Johnson Matthey Inc. (Wayne, Pa.), a leading catalyst refiner and manufacturer of catalytic converters. “Platinum recovery has more than doubled [since the early 1990s],” she notes, “palladium has more than tripled, rhodium has increased by about fourfold—and that has to do with the fact that, as time went on, emissions legislation strengthened and therefore required greater amounts of PGMs to control emissions and meet the regulations.”
Those emissions regulations are only increasing worldwide, which promises even greater demand for platinum, palladium, and rhodium, says Henry Hilliard, a PGM specialist with the U.S. Geological Survey (Reston, Va.). Since the mining of PGM ore is limited to a few areas such as Russia, South Africa, and a relatively small producer in the United States, he explains, “it’s not easy to ramp up production of PGMs to meet increasing demand. The only alternative is recovery from converters.”
As recently as the 1980s, the recycling of catalytic converters—also called autocats—was still an emerging market, notes Jeffrey Christian, managing director of CPM Group (New York City), a precious metals research and consulting firm. Today, it’s an industry that’s “in place,” he says. “It’s a business—it’s up and running and has been for a number of years in an efficient, ongoing fashion. It has identifiable market participants who account for a significant part of the market, and it has a certain profitability which, at any given time, has other people looking at it.”
At the same time, autocat recycling can be a volatile market, with prices for its major commodities swinging wildly at times. Plus, plenty of those people “looking at” the industry end up entering and leaving it relatively quickly after making more mistakes than money.
What’s driving autocat recycling, and how do smart recyclers steer clear of the industry’s major potholes? Read on for some answers.
Dismantlers, Decanners, and More
The autocat recycling industry includes a variety of firms that handle different aspects of recovering metal from converters. At one end are the collectors such as peddlers, muffler shops, auto dismantlers, autocat refurbishers, scrap yards, and others, as well as vehicle manufacturers with production scrap. These facilities often supply the converters to “decanners” that cut open the autocat canister with a shear to retrieve the PGM substrate inside (usually found as a wash-coat on a ceramic honeycomb or in bead or pellet form). There’s also a small but growing number of metallic substrate autocats that are processed with shredders rather than shears, recyclers note.
In addition to the precious metals retrieved, decanners also sell the autocat canisters, generally a high-grade mix of 409 stainless steel.
The decanned material is then shipped to smelters—often overseas, though there are domestic consumers as well. The only U.S. producer of PGMs also smelts decanned substrate.
During the smelting phase, the substrate is heated to temperatures of up to 1,600 degrees C (about 2,900 degrees F), explains the Web site of smelter Multimetco Inc. (Anniston, Ala.). This causes the precious metals “to collect together and settle to the bottom of the furnace.”
When the furnace is tapped, the substrate—which had contained roughly 0.12 percent PGMs—is now a mostly iron alloy containing 12 percent platinum, palladium, and rhodium, says Stewart Prentice, a partner in smelter Techemet L.L.P. (Houston).
After smelting, the alloyed metal is sent to a refinery where the three metals will be separated into their pure forms.
Leading refiners include Johnson Matthey, which handles material with higher quantities of PGMs at its facility in West Deptford, N.J., and exports lower-content material for refining in England; Impala Platinum Holdings Ltd. in South Africa; Japan’s Nippon PGM Co. Ltd., a joint venture between smelter Dowa Mining and refiner Tanaka Kikinzoku Kogyo, which acquires autocats through its buying arm, New York City-based Toyota Tsusho; Engelhard Corp. (Iselin, N.J.); and Umicore SA (Hoboken, Belgium), which reportedly has become the largest catalytic converter recycler in Europe following its recent acquisition of U.S.-based OM Group’s precious metals division.
Global Recovery Growing
According to Johnson Matthey’s Platinum 2003 report, global growth in the recovery of the three major PGMs from autocats has moved steadily higher in each of the last 10 years (see table on page 51) and that growth is expected to continue. Ashok Kumar, a director of A-1 Specialized Services & Supplies Inc. (Croydon, Pa.), a leading decanner, has predicted that PGM recovery from old converters could more than double over the next decade as the industry in Western Europe picks up.
North America remains the dominant player in autocat recycling, however, accounting for more than 75 percent of the industry’s platinum recovery for much of the 1990s and dropping to a “low” of 66 percent last year. Likewise, North America recovered from 64 to 77 percent of autocat palladium in the past 10 years, notes Johnson Matthey’s report, which didn’t break out rhodium recovery by region.
Autocat recovery in Western Europe has grown more than 1,700 percent for platinum since 1993 and 800 percent for palladium since 1995, Johnson Matthey reports. The region, in fact, has supplanted Japan as the number-two autocat recycler for both precious metals. Yet Western Europe accounts for a relatively small part of the overall industry, representing about 16 percent of the platinum recovered from autocats last year and 12 percent of the palladium, while Japan accounts for less than 11 percent of both platinum and palladium recovery from autocats.
Looking at the catalytic converters themselves, the U.S. Geological Survey’s Henry Hilliard estimates that only about 30 percent of the autocats that could be recovered from scrapped vehicles each year get processed domestically to recover the PGMs. Another 30 percent get shipped to a collection center where they might sit, unprocessed, awaiting better metal prices, he says. Around 20 percent get exported for PGM recovery, he adds, while another 20 percent aren’t collected at all. In Hilliard’s view, the total amount of autocats exported is probably closer to 50 percent since a large number of those converters sitting in collection centers end up being shipped overseas. Other industry watchers also see the majority of autocats—or at least the substrates within them—ending up offshore.
Estimates differ widely on how much of the PGMs originally installed in converters are actually being recovered. CPM Group’s Jeffrey Christian suspects that the total recovery is “relatively small,” with material lost at each stage of the recycling process. On the other hand, Johnson Matthey’s Zadoff puts metal recovery at 50 to 55 percent, while A-1’s Kumar sees the number much higher at 80 percent or more. Both Zadoff and Kumar agree that recovery is increasing. A decade ago, the recovery was between 40 and 45 percent, says Zadoff, while Kumar was quoted in 1991 as estimating recovery at just 60 percent.
The number of catalytic converters per vehicle is also rising—from only one to three or more on certain cars today, as preconverters and other devices are added to various models, Zadoff notes. The total amount of PGMs being used is on the rise as well, thanks in part to new converters that contain as many as five separate honeycomb substrates to meet tighter emissions controls, says Jeffrey Christian, and the average size of engines in both North America and Europe is increasing, which again boosts the need for PGMs.
Moreover, the mounting cost of vehicle recalls makes car manufacturers leery about cutting back on loadings despite advances in catalyst technology. “What’s the point of saving $10 today on platinum loadings if the car fails an emissions test and you have to mount a $400 recall in five years?” Christian asks.
Pricing and PGMs
Over the past decade or so, PGM prices have fluctuated, sometimes dramatically, with autocat manufacturers switching metals accordingly. For instance, though platinum was the most widely used metal for autocats initially, stricter emissions standards in the early 1990s led automakers to rely increasingly on lower-priced palladium (typically a third to a quarter the price of palladium, reports Johnson Matthey in Platinum 2003). But an “exceptionally rapid rise” in automaker demand for palladium in the second half of the 1990s, together with supply problems, sent palladium prices soaring from about $200 an ounce in early 1998 to more than $1,000 an ounce in January 2001. This drove automakers back toward greater use of platinum, notes Platinum 2003.
Today, however, platinum prices are at a 23-year high, which has “created a financial incentive for the auto industry to reexamine greater use of palladium once again,” the report says.
Not surprisingly, PGM prices are seen by some industry observers and participants as the key factor driving PGM recovery. Prices paid for converters range from $4 to $30 each based on the type of converter and its “loadings”—the amount and mix of PGMs used in the device, industry sources note. Techemet’s Stewart Prentice puts the recent average price at about $20. At that price, he says, auto dismantlers and shredders “look at the converter as a legitimate revenue stream,” along with the car body itself.
More specifically, the forward price—six months out—of the three key PGMs is “what really impacts converter prices,” notes A-1’s Ashok Kumar. “This is because the contained platinum, palladium, and rhodium metals require on average six months of recovery processing before they’re converted into deliverable form.”
Others note that the price of converters works hand-in-hand with the price of steel. “There must be a sufficient steel price for auto shredders to want to move their car bodies,” explains Lyn Johnston, Multimetco’s commercial manager. “At the same time, if converter prices are low, they’ll just take off the converter and let it sit there, waiting for the price to come back up.”
Likewise, when PGM prices are too low, dismantlers and shredders “won’t bother to remove converters from scrap vehicles,” Kumar says. “They’ll just send vehicle hulks off for shredding with converters attached, and once converter internals become intermixed with regular shredder fluff, the [PGM] catalyst disappears from the system.”
Fortunately, Kumar adds, “although individual platinum, palladium, and rhodium prices have moved up and down sharply over the past three years, the aggregate price seems not at any time to have dropped so low as to induce [dismantlers and shredders] to stop removing converters from scrap vehicles.”
Jessica Cross, CEO of Virtual Metals Research and Consulting Ltd. (London), notes that in Europe at least, end-of-life regulations that mandate increased recycling of vehicles “will ensure that collection rates only increase” while also reducing the influence that PGM prices have on the market. “Much of the existing price sensitivity will be removed,” she predicts, with government enforcement or encouragement of collection playing a more critical role.
A somewhat unusual factor affecting the mix of PGM recovery involves air bags. That’s because the cost of replacing a deployed airbag “can make repair of the car too expensive” for many insurers, Cross says. Thus, about 17 percent of scrapped cars in Europe are being “recycled prematurely,” she estimates.
Moreover, recent shifts in PGM usage could mean that “more palladium is being returned to the market than otherwise might be expected if the car was repaired and set out onto the road.”
Though this factor primarily affects European recovery, “I wouldn’t be surprised to see American insurers behaving the same way,” Cross states.
Know Your Converters
As noted before, the growth in PGM recovery from autocats makes the industry attractive to outsiders who think they can come in and make a quick buck. The reality is quite different. As Techemet’s Stewart Prentice explains: “Some new guy will come in and get all excited because the platinum market is bullish at the moment and they’re going to make a fortune buying converters.” Often, however, the new entrant doesn’t do his homework—or gets hoodwinked by unscrupulous suppliers—about what autocats are worth. “You have to know what you’re doing on the buying side,” says Multimetco’s Johnston. “We’ve seen people come in, try to make a splash, and disappear because they paid too much for the wrong things.”
The key to success in autocat recycling is clear but far from simple: Know your converters. More specifically, know what’s inside the converters you buy—that is, the specific mix and amounts of PGMs. Unfortunately, “each car company devises different loadings for different applications, different configurations of converters,” notes Multimetco’s Johnston. “There are hundreds of different models.”
It wasn’t always as hard as it is today. “Back in the ’70s and ’80s, most cars had the same type of converters with similar loadings of platinum, palladium, and rhodium per engine size,” notes CPM Group’s Jeffrey Christian. In the 1990s to today, “one of the things that you saw was that catalytic converter technology has improved and become much more sophisticated, and the auto industry has become much more facile in using catalysts, so that you have a very wide range of catalysts in existence today.”
For instance, though many converters today use all three key PGMs, some only use palladium while others only have platinum and rhodium, depending on the type of engine in the vehicle. “So a scrap catalyst purchasing agent today must be able to look at the different canisters and say, ‘This is the ABC model of canister, and its content is X and Y,’” Christian notes.
Ultimately, the material will be tested before smelting, but at the purchasing level—in the dismantler’s yard or shredder’s facility—there are no field tests to determine converter contents. As Christian explains, “These guys are relying on their expertise and their experience buying a lot of catalysts, inspecting them visually, and saying, ‘I’ll buy these and I’ll pay you such-and-such for them.’”
At Techemet, for instance, all converters are classified according to 24 buying categories based on laboratory analysis, test-weighings, and average values, says Stewart Prentice. Suppli-ers often group their converters by vehicle brand, with General Motors converters in one lot, Chrysler converters in another, and so on, he adds. For Techemet, the aftermarket converters from manufacturers such as Carsound and Catco are the lowest grade, followed in ascending order by converters from domestic carmakers Chrysler, Ford, and General Motors, then Japanese automobiles, then European cars such as Mercedes-Benz and BMW, which are the highest grade because of higher concentrations of PGMs.
Keeping track of all the different models and grades of converters is complicated, Prentice acknowledges. “A lot of people learn this business by making mistakes,” he notes. “They don’t actually know what they’re buying and might think a particular converter is worth $10 when it’s only worth $8 based on the differences in precious metals contained.”
For example, Prentice points to one model of converter for a diesel-powered Land Rover that looks similar to the converter for the gasoline-powered model but, in fact, is worth only about a third as much. Moreover, with platinum currently more valuable than palladium, one might expect that a converter for diesel engines—which require higher platinum loadings—would be more valuable than one for gasoline engines. This particular model of diesel converter is an older version, however, and wasn’t heavily loaded, Prentice says.
“This is the problem,” he explains, “the newer diesel units are fine, they’ve got nice amounts of platinum on them, but the older diesel units weren’t particularly good on a per-pound basis. If you don’t know this, you’ll think it’s worth more than it really is.”
Coming Down the Road?
The future for autocat recycling looks fairly bright, though some see more potential for growth in Europe, South America, and Asia than in North America. That might actually open up opportunities for some American firms. Techemet, for one, has launched a joint venture in Turin, Italy, called Invemet S.r.l. that collects and decans converters there, then ships the substrate to Houston for smelting. “We’ve gotten a major share of the Italian market, and we’re looking to expand,” Prentice notes.
Other positive developments for autocat recovery include new rules from U.S. EPA that could require catalytic converters on heavy-duty trucks and buses, which often lacked such pollution-control devices in the past. The EPA proposals, which also require reducing the sulfur content of diesel fuels, would take effect gradually, beginning in 2006 before full implementation in 2010.
Another potential change, however, could mean the end of autocats entirely. The highly touted hydrogen fuel cell engine, for instance, wouldn’t need a catalytic converter because it produces no polluting gases. Autocat recyclers aren’t worried, however.
In the first place, fuel-cell technology is a long way off from actually powering any vehicle down an American road. More importantly, even if fuel cells do eliminate the need for converters themselves, they’ll only boost the demand for recovered PGMs. That’s because fuel cells use about twice as much platinum, palladium, and rhodium as autocats use for gasoline-powered engines, notes the U.S. Geological Survey’s Hilliard.
Thus, Multimetco’s Lyn Johnston echoes the optimism of other autocat recyclers when he suggests: “Twenty years from now, we may be running fuel cells.”
Robert L. Reid is managing editor of Scrap. •
The recovery of platinum-group metals from catalytic converters has increased dramatically in the past decade and is likely to continue upward. Here’s a look at what’s driving this recycling niche.