Tolling vs. Hoarding Your Converters: Why Tolling Can Give You a Strategic Advantage in a Volatile Market

Tolling vs. Hoarding Your Converters

If you’re recycling converters in today’s market, you might be struggling to decide if you should hoard your material or toll it. With slow market developments, we understand why most recyclers are choosing to keep their converters in-house until prices for platinum, palladium, and rhodium rebound. The truth is, however, that hoarded material doesn’t give you a strategic advantage.

Tolling, on the other hand, equips you with a sharper competitive edge and gives you a head start for when market prices start meeting your expectations. However, we understand that tolling may feel like unknown territory for some of you, and that’s why we’re peeling back the layers of confusion today. So if you’re ready to get informed, keep reading.

What Is Tolling?

Tolling is the process of securely banking your precious metal ounces for a period of time without hedging or receiving payment. That means that you’re shipping your converters to your processor, getting them processed, and choosing to receive payment only after your contract period has ended.

For example, if your processor has a contractual period of 150 days and you choose to toll, you can’t hedge or receive payment until those 150 days have passed. Once your contract period is over, you can choose to keep tolling or hedge fully or partially.

Tolling is like treating your ounces like a bank, and it equips you with advantages that most recyclers aren’t aware of. Let’s take a look.

The Benefits of Tolling

Tolling allows you to hedge faster, avoid unfavorable interest rates, and ensure the security of your material. To help you get a true understanding of tolling, we used PMR’s unique tolling options as an example.

Faster Hedging

Tolled converters are processed and assayed, which means you get access to your troy ounce recovery figures once the analysis is completed. With these figures, you can predict your converter returns based on the current market prices of platinum, palladium, and rhodium.

That means that when prices are where you want them to be, you have all the information necessary to hedge your prices quickly before the market changes again.

Avoid Lease Rates and Interest

Because you’ve processed your converters and waited until your contract period is over, your processor holds physical ounces of your material. So you can skip right past the lease rates and access spot pricing directly.

Tolling options only allow payment to be delivered at the end of your contract, which means you avoid paying interest whenever you choose to request payment.

So if you’re going to hoard your material and wait for specific market pricing, why not choose to toll your material instead and avoid paying any interest?

Secured Material

You deserve the peace of mind that comes with knowing your material is safe. When you toll your material, your ounces are kept safely with PMR, and you don’t have to worry about the possibility of  break-ins and theft.

Is Tolling Beneficial in the Current Market?

In this market, tolling might be an option to explore if you want a strategic advantage.

While other recyclers will need to ship their material and wait for their assay results, you’ll already be ahead.

To help you make the most informed decision, let’s take a look at some market figures and predictions.

Extremely Volatile Conditions on the PGM Market

Market trends change all the time, but they’ve been extremely volatile since 2020. We’ve seen platinum dip below the $900 and then rise to $1,100 in a matter of months. Palladium has followed the same volatile trend as platinum, dropping from a high of $3,000 to $1,500 in a few months. Rhodium rose from $10,000 to $20,000 in a year only to fall back down to $15,000 after a few months.

Because the market moves so quickly, the data points to a need for speed. With prices rising and falling rapidly, you’ll want to have the agility to take advantage of the trends that will benefit your business before the market changes again.

Market Predictions & How Tolling Helps You Stay One Step Ahead

In Johnson Matthey’s latest PGM report, they predict a return to a balanced market in 2023. Gradual recovery in new vehicle sales will encourage the recycling of scrap vehicles and their converters, meaning an increase in the secondary supply of PGMs. Industrial and automotive demand will remain strong, especially for platinum.

As for the market values of platinum, palladium, and rhodium, only platinum has kept an increasing trend. Since the dark days of spring 2020, platinum keeps hitting higher values. However, Johnson Matthey’s are hopeful for a return of higher palladium and rhodium prices!

The data shows a very gradual return to a strong PGM market. And once the market rebounds, you’ll want to be the first to benefit from those market trends without waiting to ship your converters and get your assay results. So if you want to get a strategic advantage that pushes you ahead, toll your converters and stack the odds in your favor.

For more information, visit PMR’s Resource Center.

Published: August 24, 2023
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