24
Apr
2019
CATALYTIC CONVERTERS - 2019 OUTLOOK ?💼

POSTED BY ALICE

 

 

Last year was a strong year for the catalytic recycling market, although not for all Platinum Group Metals (PGM’s)…

 

Auto catalyst recovery by metal

 

The Volkswagen “Dieselgate” car emissions fraud scandal that came to notice in 2015, led to stricter vehicle testing procedures being introduced, together with tighter emission limits on heavy-duty vehicles. This in turn has contributed to a higher demand for converters and for PGMs. This is excellent news for palladium, and reflects the increased proportion of the metal - at the expense of platinum - used in catalysts since the late 1990s in order to improve the “cleanliness” of the fuel, and to take advantage of, at the time, palladium’s lower price (less than half that of platinum).

 

Johnson Matthey, in its PGM Market Report (February 13, 2019) stated that “the secondary supply of palladium grew by 10 percent in 2018, following on from a 20 percent gain the previous year. This is due to the increase in vehicle recycling once the scrap steel price bounced back from its lows during 2015 – 2016.”

2019 has started in a similar vein, and there is nothing, in our view, to suggest that this trend will not continue.

 

Demand for rhodium will also increase as tighter regulations on emission standards bite but, as stocks of that metal remain in surplus, little price movement is anticipated.

 

On the other hand, the lower demand for diesel vehicles in Europe, combined with an increase in supply from the growth in recycling continues to hold the Platinum price down. Nevertheless, despite the decreased use of platinum in three-way catalysts over the past 20 years, this will be offset, to an extent, by a growth in demand from fuel cell technology in automotive applications and from stationary power generation over the next few years.

 

Auto catalyst recovery by metal

 

Philip Newman, the Director of Metals Focus, a London-based independent precious metals consultancy group, when asked to comment on the outlook for platinum and palladium in 2019, said:

 

Platinum has fallen to a record discount to the gold of $526. That said, Metals Focus still expects platinum prices to eventually firm this year, especially towards the end of 2019. However, this is premised on our view of a stronger gold price. In other words, platinum will continue to face headwinds of unsupportive supply and demand.

“In trying to gauge professional investor sentiment in recent weeks, the absence of up-to-date CFTC data has led us to review Nymex's open interest. Having fallen for much of January, open interest has since risen through to mid-February. In our view, subdued weak institutional sentiment towards platinum indicates that the rise in open interest represents an increase in gross short positions.

Palladium has continued to strengthen this year, achieving a new record high of $1,439 on 17th January. Key to this is the ongoing physical deficit in the palladium market, which this year is expected by Metals Focus to reach 1 million ounces.

“Looking ahead, we believe palladium prices will continue to rise this year. Even so, palladium’s record-high prices increase the risk of short-term profit-taking, although any downturn in the palladium price should be short-lived.”

 

In summary, 2018 was a great year for catalytic converter recycling, in terms of the value of the precious metals they contain, and for 2019 it looks to be more of the same. For those dealing in scrap converters, there will continue to be significant profit opportunities, and as technology, efficiency, and professionalism within the industry improve, the quantity of PGM’s recovered will get better and returns further increased.