Data Mining in Converter Recycling: Do you Know your Statistics?
Published by Recycling Today: Data Mining in Converter Recycling: Do you Know your Statistics?
Catalytic converters are the most complex non-ferrous item in our industry. How to properly evaluate your returns and results can get confusing, especially when you are new to toll-refining and assay. Most companies only look at their average price per unit, but this statistic can be extremely misleading. With that said, this article will give you a more in-depth explanation of all the important data points that should be tracked when selling by toll-refining, which in turn will provide you with the confidence to review and interpret your toll-refining invoices with ease.
To begin, it all starts with your tally and having an accurate daily running count of your converters. Some recyclers in our industry re-sort and count an entire load before it ships out, however, this typically increases the chance of errors. Having an organized tracking and inventory system in place from the start will prevent counting errors from occurring. A sophisticated counting system will also allow for accurate evaluation of gross and net weights from a final invoice because a true physical converter count will be recorded for each load.
As a side note, every time you fill a box of converters, the gaylord box should be securely wrapped and remain un-opened until it gets to your buyers’ facility.
Once a count is established, it’s important to work with a processor that also counts and touches each unit upon arrival. Having access and being provided with a detailed grading report is essential for the following reasons:
1. It promotes a transparent business relationship with your buyer and processor.
2. It provides you with a comparative report between your count and processor’s count, and how it matches up from your shipping to your processor’s receiving.
At PMR, we like to call this statistic, booking accuracy and as a rule of thumb, if a recycler is within the +/- 2% range, they are accurately counting their material. Unfortunately, many companies are well over the 5% mark, which is too high. More importantly, when your booking accuracy is truly reflective of your load, it is a great tool for not only hedging metals accurately but also monitoring theft.
Next, we want to track the extras percentage. An extra is any converter type categorized outside of an OEM ceramic converter, which includes aftermarkets, foil and diesel converters. Most yards will have an extra’s percentage of 10-20% on average per load. This is important to track because if hedging in advance, a potential over hedge can occur, as converters categorized as extras will not generate many ounces (or any ounces at all if they are paid by the piece due to insufficient weight requirements for assay).
Moving on, we want to look at the partial percentage – this represents how much loss on average a converter load may have. Data shows that a typical load will have 4-5% broken or partially full converters. If a recycler is under 5%, then this is a good indicator that material is being dismantled correctly and units are being managed with care. On the other hand, if a partial percentage is well over 5%, then this could be the result of improper dismantling due to aggressive pulling. If converters are mangled during dismantling and dust is being lost or flying out of the converter, a different method, tool, or solution should be found to remove the converter from the vehicle.
A scrap metal yard buying from the public, should also be cautious of the material being collected, and validate that the material being purchased is not the result of dumping predominantly broken converters (this is a major red flag). Individual sellers might bring empty or half-full converters to a scrap yard and when converter fullness isn’t verified, the converter may be purchased for more than it is worth because the purchase price assumes a full unit. To go even further, if you are a recycler purchasing converters from the public, exercise extreme caution when purchasing by serial number or code.
Deceitful practices have emerged such as:
– Re-stamping converter shells with high-value serial numbers.
– Faking OEM units by either filling empty converters with aftermarket material or fabricating a brand-new converter shell/heatshield, such as a Honda O2 Premium or Hyundai, with a brand-new aftermarket puck within.
All of which, would again result in extreme overpaying for material.
Converter count, booking accuracy as well as extras and partials percentages are all data points that must be tracked and considered before a load is even processed. The next set of data points will focus on what to evaluate and analyze once assay results are available from toll-refining.
Parts per million, also referred to as PPMs, are one of the most important metrics on an invoice when selling on assay. This metric provides clear readings of the precious metal content within a converter load. Let it be known that it is difficult to have absolute consistency with these evaluations because the mixture of a given load varies from one shipment to the next. Vehicle mileage, the region in which the converter was manufactured for, converter ware and tare as well as different emissions standards laws all influence the value of a converter. With that said, the precious metal content will differ in each converter load. Keep in mind that results from a scrap metal yard will have a greater propensity to vary, because material is being purchased from a multitude of sources, unlike the auto recycler strictly pulling converters from vehicles.
Some other fun facts to consider:
– The older the converter, results will generally depict higher platinum and lower palladium.
– A trend being seen right now is late model converters generally depicting very low platinum, and extremely high palladium. Not all loads and yards are the same, so this is not an absolute, but it has been a predominate trend in current market.
– Every decade manufacturers will reconsider the composition of metals used in a converter due to changing metal prices of platinum, palladium, and rhodium as well as scientific findings relating to the success and efficiency of each metal in reducing emissions. These changes will only be seen once vehicles reach end of life.
Next up is weight per converter, which is an exceptionally critical statistic, but will only be trackable if your processor provides a complete grading report displaying full and partial units (a good way to know if you are working with the correct partner). An average converter contains about 2 lbs of honeycomb inside of the shell. Therefore, if weight per converter is higher than 2.3 lbs, this indicates that the converters are more likely to be older heavier converters with lower PPM’s. If weight per can is under 1.8 lbs, then that most likely indicates a composition of late model units with very high PPM’s. A good grading report can provide greater insight on how results will turn out, or at least provide certain benchmarks. For example, if you had a low weight per converter (below 1.8 lbs) but your grading report shows 40%+ of pre-units, then the weight makes sense and there is no cause for alarm.
Moving on, the next data point to review is returnable ounces. Ounces are generated from material’s processed weight and PPMs and tracking this metric will help a recycler decipher patterns. For instance, if a hedge is made up front, specifically an estimate of 80% of total ounces, this can then be compared with the results when the assay is complete. In tracking this, a recycler can figure out if a good number of ounces are being hedged or if there is a constant over hedge occurring, and the need to reduce the hedge percentage over time. As a side note, if no assay history is yet available, a safe bet would be to aim for 60-80% of national average when hedging material.
Once enough assay history is accumulated, recyclers will have the ability to validate each of the above data points against a running average of their past lots. This will truly give recyclers the ability to track their own converter statistics and identify irregularities. Outliers do happen in refining but when tracking the right metrics, these can be easily explained from the information found in the grading and/or assay report. For example, if platinum parts per million is exceptionally low on an assay report, but the palladium part per million is exceptionally high, this will indicate no cause for concern because these two metals usually work as opposites (under the assumption that a lot is not cherry-picked). Same would apply for weight per converter versus parts per million for late model vehicles; typically, lower weight per converter will have higher parts per million.
Most converter buyers and processors only track a few statistics, like average value per unit and parts per million. However, to evaluate a load or a processor, a multitude of data points must be considered to approach a fair and accurate assessment and comparison. At PMR, we help our suppliers not only in the proper tracking of all the data points listed above, but also in understanding what these statistics mean for them and their business.
To conclude, if you think the results of one of your converter loads is off, ask your buyer and processor to further explain your numbers. If they cannot give you a statistical explanation and justification … it’s time to find a buyer and processor who can. Start working with a partner that provides the answers, and not more questions.
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