Do you have a Price List?

Do you have a Price List?

Do you have a Price List?

JUNE 2022

Do you have a price list? That is often one of the first questions we get when speaking to a new potential supplier. The answer is simple: Yes and no. Make sense? Probably not yet, but it will once we take a look at a few methods for pricing out converters. Let’s first examine what determines the price of converters in broad strokes.

If you’re reading this article, chances are you’re aware that catalytic converters of all types are loaded with precious platinum group metals (PGMs); platinum (PT), palladium (PD), and rhodium (RH). Values for these metals fluctuate all day long, so it’s important to have access to information that keeps pricing up to date. Market forces that affect PGM prices would be the subject of another article.

Now that we know that catalytic converters contain precious metals, how much of each metal do they contain? Well, it depends. But bear with me, it will make sense soon. The loadings of precious metals are dependant on several factors:

– Emissions laws in the state for which the car is being manufactured (stricter laws = more PGMs)
– The type of vehicle for which the converter was manufactured (Hybrid? Truck?)
– The converter’s lifecycle on the vehicle (example, was the vehicle driven for 1000 miles before being wrecked or 100,000?
– How was the vehicle dismantled (was it dismantled incorrectly or the converter man-handled?)

For these reasons, no two converters live the same life, and so no two converters with the same code will have exactly the same value. Considering this, how do different companies provide information on converter pricing? We’ll talk about app prices, loss leaders, and across the board pricing.

Comparing apps, Part 1:

Very often an auto scrap company may have access to multiple applications for pricing out catalytic converters, but how do you know which is best? Which one has the “real” value of a converter? When comparing apps from toll refiners (companies that assay), looking up the same code or serial number might get you two different prices. Company A might have 123ABC at $250, while Company B displays $200. Does that mean company A pays more for that code? Of course not!

When these apps display a value for a code, they have analyzed individually multiple units from that code and display an average of the units they analyzed. So, if company A analyzed five units and reached an average of $250, all that means is the units they analyzed happened to have higher values than the units analyzed by Company B. This explains why Company A is higher on some codes, while Company B is higher on others. When used correctly, both apps can help you purchase converters.

Comparing apps, Part 2:

The other comparison we get often is comparing apps from a toll refiner to a company that buys by the piece. Company X will have a Code listed for $300, more than both Company’s A and B. Here is where the trouble begins for people looking to make the switch from selling to a cash buyer. Higher $ means more money, right? Yes, but actually, no. Company A and B are typically giving a price to buy the unit, while company X is giving you a price they will pay you. So, how are they able to pay more than a toll refiner anyway?

This brings up a frequent topic of discussion: Loss leaders. Everyone who sells converters knows the game cash buyers play by seeing who offers the highest price on [insert well-known high-priced converter here]. That is often one of the other early questions we get when speaking to a new potential supplier, “how much do you pay on [insert well-known high-priced converter here].”

The problem with this mindset is it allows cash buyers to inflate their perceived overall value based on a few loss leaders (meaning they don’t mind taking a loss on the high visibility units, so long as they can underpay on the rest). The caveat with this kind of pricing is there is always an unspoken limit on how many of those same high value units they would be willing to buy at that price (knowing they’re losing money on each one), and how much do they pay for some lower value lesser-known units, or “no codes”.

So that that begs the question, how do cash buying companies set prices for their own app/price list? Simple; they sell to a toll refiner that provides them with the same pricing information provided to any other supplier and adapt that information to meet their needs and price points.

The next pricing method to discuss is across the board pricing. Some companies like the simplicity of knowing that got paid $X per unit across the board. But is it really so simple? The danger with averages is how easy they are to manipulate. It boils down to how you count. Does your buyer offering $X across the board count all units on a pipe as one unit? Do they pile up the aftermarkets and count it as one? Pricing converters this way obscures a lot of information a seller would need to figure out if they are getting a good price or not.

A catalytic converter is worth the amount of contained precious metals and based on market prices of those precious metals at the time. If that seems opaque, that’s because it is.

The truth is, there is no way to determine the real value of a catalytic converter without going through the assay process. Because all toll refiners require some sort of volume, your pricing will be determined on an entire load rather than piece by piece. Catalytic converters are not like other scrap you may deal with where a ton of copper/steel here is equal to a ton of copper/steel there.

That also means that no, we don’t have a price list like you may be used to. What a toll refiner offers is pricing information to help you purchase converters, but it is not like your static price list or app that gives pricing by code. The distinction seems small, but it makes all the difference when figuring out which method works best. Do you want to buy and sell based on more or less static prices or receive up to date information that can be adapted to suit your needs?

To summarize:

– Ensure you understand how the company you’re selling to determines pricing information they offer.
– Selling by the piece means accepting a predetermined value on your converters without knowing what they are truly worth.
– Selling for across the board pricing means accepting a value that hides counts, unit types, and true value.

I hope this sheds light on determining values of catalytic converters and the importance of working with a company that will provide you with the most information possible to ensure profitability and accountability in your operation. For any questions call us at 1-855-901-5050!

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Published: June 10, 2022
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