It's steady as she goes" in the catalytic converter market. The scrap market for PGMs (platinum group metals) is intimately tied to the catalytic converter market. While mined output of basic materials and speculators play roles, it is the catalytic converter market that drives the recycling sector.
"We're pretty steady," says Niel Shalit, CEO of Catalytic Converter Corp., Jamaica, N.Y. His firm deals mainly with recycling yards that produce 2,000 or more units per month.
Ashok Kumar, director of A-1 Specialized Services & Supplies Inc., the Pennsylvania-based multi-national recycler that specializes in lot consolidation and dry processing of salvage converters, says 2004 will end with global recycled production of platinum at 730,000 ounces, palladium at 450,000 ounces and rhodium at 120,000 ounces.
By year 2010, Kumar predicts these numbers will more than double, largely because of the sharply increased retirement of converter equipped cars in Western European countries.
TAKING INVENTORY. Jeff Couture, president of Prospera Metals Inc., Petrolia, Ontario, Canada, says he sees a lot of converters in the marketplace. Things really picked up in March and April Prospera deals in Ontario, Quebec, Ohio and Michigan--areas that had a dreary winter.
"Most scrap yards were pretty lazy getting converters off the yard in January and February," Couture says. "In March and April we were much busier."
Couture says he thinks recyclers were even slower about moving material this winter than in previous ones. But as spring moved toward summer, things began hopping. "Business is strong," he says.
Roughly 10 percent of the world supply of PGMs comes from recycled catalytic converters, a figure that has grown steadily in the past quarter-century.
The impact of this increase in supply from recycling will vary. Since August 2001, the price for platinum has moved steadily up from $450 to $937, setting a 24year high. The principal factor has been increasing platinum demand in Europe for diesel cars, which will make up 50 percent of the vehicles produced in Europe, Kumar says. Platinum is presently the only suitable metal for converters used with diesel cars. In 2000, automakers demanded around 1.9 million ounces of platinum.
In 2004, demand is expected to be 3 million ounces. Kumar says platinum will play a dominant role in the coming years. "The 2007 heavy-duty diesel emission standards in North America and the required reduction of sulfur content from the current levels by year 2006 program will introduce a new perilous outlook for platinum," says Kumar.
Palladium could experience an opposite run. Palladium saw an early April 2003 price of $148--a long way from a metal that was moving close to $1,100 a couple of years ago. ByMayof2004, it had added $100 back to its price, but the first half of 2004 saw it struggling to break out of its bottom-feeding trough.
ACTIVE MINING. Oversupply has hurt palladium prices. The oversupply was because of a run-up in nickel prices. Miners, especially in Russia, saw nickel prices make a nice upward move and logically dug more nickel ... thus extracting more palladium.
Palladium has been tracking at 30 percent of the price for platinum, selling around $300, and most observers say it should not experience a price shock.
"Producers understand and accept that palladium is not going to be at the $1,000 level again," says Kumar. "Perhaps it will remain as a couple-hundred dollar commodity."
Worldwide mine production of palladium already exceeds the current total demand rate of about 4.5 million ounces. Total palladium supply in year 2006 will probably be around 7 million ounces, and the recycling industry itself will provide ample palladium starting in 2009, it is forecast. Palladium is strongly oversupplied, and usage of palladium will remain strong in the coming years,
Rhodium is banging around the $800 mark, having settled back from a record $7,000 all ounce in the early 1990s.
In early May, spot prices for platinum hovered around $800 per ounce, palladium in the $250 range. Platinum was at $625 per ounce in early April 2003 and facing a spot price in the $680-$707 per ounce range--a 23-year high. Less than 15 months later, it was up another $200 per ounce. So much for records. And to think, back in 2002, the average platinum price was $540.03.
"I wish I could gauge the market," Shalit says. "For me, platinum is going up too fast." Like most firms, Catalytic Converter Corp. buys and sells on a daily basis. A steady price is better than one with leaps and bounds--either up or down.
Couture says that the higher prices for converters have drawn peddlers into the market--people offering a relative handful of converters. He says some buyers took advantage of the newcomers' naivete.
As the platinum market moved higher, some people were offering $57-$59 for GM (General Motors) style converters. "That is more than a GM converter is worth refined," Couture says. He says that some buyers were making up their loss on grade, accepting a handful at the high price but buying other converters as "regulars" and not premium items.
