Top Ten Converter Myths and Misconceptions

Top Ten Converter Myths and Misconceptions

Over the years, many myths and misconceptions have developed about the catalytic converter business. Many of these myths and misconceptions are related to one of the most important questions in the industry: Who can be trusted with catalytic converter scrap price?

All kinds of buyers have been knocking on doors for years to offer the best catalytic converter scrap price. With so many buyers out there, how can scrapyards tell the difference?

With years of experience speaking with hundreds of scrapyard owners and managers, PMR has compiled a list of the ten converter myths most in need of busting.

“Multiple Buyers Bidding on My Stock Will Get Me the Best Price”

Because there are different types of converter buyers, each might have conflicting information about converter value. While each buyer knows the price catalyst material, they might be basing this knowledge on different sources.

What that means is that one buyer might be referring to a price list and another buyer might be referencing a serial number catalog. During a bid, it’s important to remember that buyers are referring to prices that reflect the converters they’re familiar with and not necessarily the converter you’re selling.

The best way to ensure you can profit from your material is knowing how to deal with a buyer.

Dealing with a Buyer

If multiple buyers bid on your stock, there are a few questions you should ask yourself so that you can understand where they’re getting their prices from.

Has the winning bidder inflated his price so he won’t have to bid again? Is the mix of converters similar each month? Are the core buyers in your area colluding to swap the winning bid back and forth every other load? How many serial numbers can each buyer actually see on your converters? What percentage of the load is being purchased by grade rather than by number?

Bear in mind that if you deal with core buyers, they sell the material up the catalytic converter food chain. When converters move from hand to hand, each will take a portion of the profit. There is nothing unusual about this, as core buyers need to make a living while giving you the best price for your converters.

The Once in a Blue Moon Deal

In the occasional case, yard-owners might receive more money for their converters than what they’re actually worth.

This is because buyers might overpay based on inaccurate pricing information or as a strategy to win a bid. Needless to say, this is not a smart business decision. Buyers can’t repeatedly overpay for material and sustain their operations.

The idea of a bidding war seems more profitable, but if converters are going to change hands, there is still money being lost by yard-owners. On the other hand, dealing with a converter processor/refiner allows you to take advantage of the full value of your material. You won’t be dealing with multiple buyers with conflicting pricing information, and it won’t be as difficult to ensure the best value for your material.

“Selling Per Unit Means More Money”

Many converter companies today invest a lot of time and money in developing databases where they catalog converter value by serial number. Some companies are more advanced than others and are able to offer these tools online, while others are still sending out a price list every week. These lists can contain hundreds of different numbers, but make it easier to profit from selling converters based on unit prices.

3 Reasons Why Selling Per Unit Isn’t Profitable

Selling per unit isn’t the most profitable way to sell material. If you sell per unit, based on serial number catalogs or price lists, you’re not maximizing the value of your stock. Here are 3 reasons why.

Profit Margins

When a company pays for a converter based on a serial number, they’ve taken one example of that converter or several with the same number and analyzed that specific converter for its value. Looking at that particular converter will allow the buyer to determine a value – but only for that specific unit.

To make a profit, buyers need to build in their profit margins according to the published number. Some companies will choose to have a few prices published with next to no profit for them, but that is only to hide their profit margins. The company will make up the difference in converters with unknown pricing data or with rarely seen units that have not been analyzed frequently.

Serial Number Visibility

It’s no surprise that at the end of a vehicle’s life, converters are often dirty and rusty things. Even the most experienced buyer with the best information in the world will only be able to decipher 60% of serial numbers. In cars from areas with particularly bad weather, that average drops to less than 25%.

As a result, core buyers cannot buy a majority of your material with a low margin of profit because most of the serial numbers have been eroded. That’s because these core buyers sell your converters to another company or processor, and the process repeats: the buyer sells at a low price to the seller because the value is only determined by a sheet of paper and not by assay.

You’re Not Getting The True Value For Your Material

Now that your buyer has acquired your converters with their built-in profit margins, they must sell to another company/processor. As explained above, your buyer has built in their margins to ensure that when they resell the converters, they make a profit. But what does that mean for you?

The change of hands ultimately means that you are at least one or two steps away from getting the best value for your converters. You’re selling to someone else who will sell to another company who will then assay the material to determine its value. You, as the first seller, don’t gain access to that value.

“I Can Evaluate a Converter Buyer Based on the Price List They Send Me”

price list is only as good as the buyer using it. Most yard owners and even managers can identify a large “bread loaf” from an “aftermarket”, but their knowledge stops there. There are so many categories and grades of catalytic converters that it’s impossible to know them all. Even knowledgeable buyers come across converters they’ve never seen before.

If you only look at price lists and sell based on the highest prices, you’re leaving a lot of money on the table. On price lists and in serial number catalogs, material is graded to the buyer’s advantage. There are so many converters with a much higher value than the category they are placed in, but since buyers are trying to protect their profit margins, the value of these converters is lowered.

“Cutting My Own Converters Will Get Me More Money”

Contrary to popular belief, decanning converters is no easy task. Making sure all precious metal content within the converter ceramic is captured and retained requires cutting-edge machinery. That also means higher capital investment in equipment, health and safety education, and salaries for operators. And we can’t forget the pressure to produce the minimum material requirement to maintain regular business with a smelter.

Companies that cut converters on their own will often make more money than they do selling to core buyers. But even some of the best equipment on the market today for cutting and collecting ceramic dust isn’t efficient.

Using companies that specialize in this service is the best way to go. Scrap yard owners and core buyers who work with specialists, such as converter processors who ensure the material is cut properly and that all ceramic dust is captured, maintain their material’s value.

“I Should Only Follow the Price of Platinum”

People in the scrap industry don’t realize that there are three precious metals recovered from auto catalysts. Platinum, palladium, and rhodium are some of Earth’s rarest metals, so don’t just keep up with platinum!

Understanding Different Metal Loadings

Platinum (PT), palladium (PD), and rhodium (RH) are loaded into every gasoline-based vehicle. Auto manufactures will use converters with these metals based on several factors. 

The environmental requirements of the jurisdiction the car is being delivered to plays a significant role in precious metal loadings. Different countries or states have different emissions laws, so depending on where the converter will be sent, its loadings will vary. The combination of precious metals that will most efficiently convert toxic gas emissions into less harmful pollutants also needs to be factored in when converters are loaded with PGMs.

The Rise of Palladium

Fifteen years ago, platinum played an important role in determining the value of a converter. However, carmakers have since begun to load converters with more palladium due to its lower cost.

While platinum used to be the number one metal loaded into a converter, today, the palladium used is now three times as much as the platinum.

With this growing popularity, palladium is the metal to pay very close attention to. The typically more expensive platinum comes in at a close second. Rhodium, making up about one-eighth of the precious metals recovered in converters, comes in a distant third.

“Smelting is the End of the Converter Refining Process”

This is one of the most common misconceptions in the industry. Smelting is one step closer to the end of the line for recycled ceramic converters, but it definitely isn’t the final stage.

To satisfy your curiosity, the real refining process takes place after the ceramic is smelted.The metals are subjected to chemical treatment to separate them into their purest states. Even then, the metals are not in the form of pure bars. At this stage, the metal ounces produced are sent right back into the automotive or industrial catalyst industry.

Material Requirements for Smelting

A smelter requires thousands and thousands of pounds of material to be constantly added to the furnace mix. It’s impossible to tell which metals belong to whom once the smelting process starts.

What comes out of a smelter is a combination of the three precious metals and is referred to as a sponge. When it cools into ingots, it must be chemically refined to its purest rare elemental state.

Always remember that no one gets paid for their converters in this way.

“You're Only a Toll Refiner if You Have a Smelter”

It’s possible to be operating as a toll refiner and not own a furnace. It can actually be more profitable to be a toll refiner and broker the furnace work.

Do the Sampling, Broker the Smelting

Processors with accurate sampling methods and access to a state-of-the-art laboratory generate higher profits for their suppliers.

The only way to accurately determine catalytic converter scrap price is through assay. Converters are decanned, the ceramic crushed and commingled, and a sample of the load is taken into the lab for testing. Toll refiners analyze representative samples by XRF (X-Ray fluorescence) and ICP (inductive coupled plasma) technology to determine the value of a given load.

“A Smelter Can Pay More”

Because the only way to determine the price for a ceramic auto catalyst is by assay, a smelter cannot pay more than the value determined by assay. What comes out of a furnace is the collective metal from thousands of tonnes of auto catalyst. It’s not possible to separate one lot from another at this stage of the process.

“A Converter is Worth $X”

Most yard managers and owners have been trained to believe that certain converters are worth a certain price. The issue with this logic is that each and every converter lives a different life. It’s impossible to uniformly categorize converters because analysis can reveal that even two apparently identical converters have different values.

Let’s look at an example with a Large Bread Loaf converter. Yard owners and managers are used to refusing any price lower than USD $80 for any Large Bread Loaf. With analysis, results can range considerably for this grade of converter. They’ll depend on the life cycle of the converter in question, where it was originally sold, the engine brand, and much more. The value of this type of converter is impossible to know without individual analysis.

This means that the value of a Large Bread Loaf can vary from $40 to $240. The average price will also change with the price of precious metals on the current market.

With a spread that big, you’ll want to get it analyzed so you can be confident of its value.

“Bigger Converters are Worth More”

Bigger is not always better. As we’ve already mentioned, every converter contains different levels of platinum, palladium, and rhodium.

Car manufacturers use different precious metal loadings in different combinations for each engine. Older cars have larger converters with lower loadings of precious metals, while more recent models have a much smaller converter with a relatively higher load of precious metals.

This can make things confusing when trying to value a core. The best way to know the actual value of your material is to work with a company that provides an extensive database of converters, assay results, and current metal market prices.

The End of the Line is Where You Want to Be

There are many ways to sell your converters but no matter which method you choose, their journey will be the same: they’ll end up in a batch that is decanned, processed, and assayed. Then they’ll be sent to a smelter, chemically refined and, in most cases, made into another converter. So whichever way you spin it, the converters you’re selling today will end up at a processor, so why not get closer to the finish line and bank on your investments right now?

The only way to determine catalytic converter scrap price is to work as close to the end of the line as possible. Find a processor that offers great service, information, and terms – you’ll have found a great home for your auto catalyst business.

For more evaluation and processing knowledge, visit PMR’s Resource Center.

Published: October 27, 2017
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