The importance of education to successful catalytic converter programs is key, because its not just a core, its a commodity.
For the past four years, ARA has been dedicating an educational session to the topic of precious metals and converter sales, apart from other commodity sales. The goal of this and any session offered at the ARA Annual Convention & Expo is to educate recyclers so that they can compete effectively in today’s marketplace and be more profitable: bottom line. The reason for a stand-alone session on automotive catalyst from time to time is simple: it is not a core, it is a high-dollar commodity, and it requires education. The uneducated recycler is more susceptible to unfair trading practices.
Look at the trade show floor of any given automotive recycling convention and converter recycling owns a fair amount of real estate. For most automotive recyclers the revenue that comes from commodity sales, including scrap catalytic converters, is no longer part of the “gravy train,” but rather a line item that contributes to effectively acquiring vehicles, accurately measuring profitability, and properly valuing the company. The sale of the scrap catalytic converters, one of the high-dollar commodity items, is simple and complex at the same time.
The sale is simple in many ways: sell it outright or sell it on recovery (assay) of the three precious metals contained inside, platinum, palladium, and rhodium. The sale is complex in many ways: pricing outright can be subjective, unfair trading practices exist with both sales methods, the supply chain has many players, and the process of recycling is scientific.
The outright sale of converters by the piece or unit has historically been the norm for recyclers. The inherent problem to getting a fair shake with this method has been the lack of a reliable basis for matching up the price offered with the individual converter. How can you be sure that the price offered is fair and reflective of the actual precious metals contained in that catalytic converter from that vehicle?
Selling on recovery or assay eliminates part of problem with subjective pricing but introduces more complexity and opportunity for loss at the same time. This is the primary reason for the educational sessions being offered to recyclers. The more a recycler learns about converter recycling the better able he or she is to put themselves in the driver’s seat of the sale.
There is only one way to recycle a converter: disassemble it, mill it, sample it, analyze it, smelt it, and refine it into three precious metals. This is a slight oversimplification because each of these steps has a rigorous set of scientific procedures involved to accurately determine the scrap or recycled value and there is a cost associated with each step including when you choose to get paid.
Not only is there a cost associated with each recycling and refining step, there is margin for each participant or player in the recycling supply chain: recycler, collector, trading company, sales agent, processor, smelter, refiner. As a recycler, knowing how many hands are in the converter recycling cookie jar is paramount. The goal of recyclers is to get the most money for the commodity with the lowest recycling costs. This is where market expertise, knowing how and when to sell metal; leveraging recycling volumes with a larger group of recyclers, to take advantage of lower recycling costs; and using a dedicated processor, a company that balances all the weights in and out and works directly with a refiner, becomes important.
Choosing the correct recycling partner is everything. A good recycling partner represents the recycler to the refiner. A good recycling partner negotiates the commercial contract on behalf of the recycler with the refiner. A good recycling partner understands and can vet the accuracy of the de-canning, sampling and assaying procedures of the refiner for the recycler because it knows this is how payment is determined. A good recycling partner maximizes the metal market price for the recycler. Most importantly, a good recycling partner has a vested interest in maximizing the invoice for the recycler.
The following is an aside on bidding-out converters. In bidding, someone wins and someone loses even with the person selling and buying the units. Recyclers may think that they won the round and maybe the next person, down the road, will take a little less. In truth, liken it to the Las Vegas casinos. Over time, the House generally wins.
While recyclers have begun to grasp the importance of understanding precious metals and how to recycle catalytic converters, even with all its complexity, the most valuable nuggets of education remain simple. Know how many converters you have for sale. Sell as close to the end of the supply chain as is economically beneficial. Choose a reliable and scientific standard for the sale. Try to get paid on an actual invoice by assay with metal prices that are verifiable by date on a known market exchange.
Education, knowledge, trust, and expertise between both trading partners forms the best foundation for the profitable sale of any commodity, especially catalytic converters.
There is enormous financial benefit to recyclers that ARA remains committed to education and training in key areas for its members.
Mark your calendars and make plans to attend ARA’s 74th Annual Convention & Expo in Dallas, TX, this November 1-4.
Becky Berube is Vice Chair of the ARA Events Advisory Committee. She serves the automotive recycling industry at United Catalyst Corporation, a North American processor of scrap catalytic converters and a precious metals management company.