Scrap Catalyst Supply Chain – Value Implications

In this post we consider the effect of a dealer’s position in the supply chain on the cash value realised for their scrap catalyst stock. This is one of several interrelated factors affecting prices received for scrap catalyst (others being processing costs and PGM market price) that the Scrap Catalyst Hub strategy seeks to mitigate.

Scrap catalyst follow a route up the recycling supply chain from dismantled end-of-life vehicles through a variety of dealers, collectors and pre-processors, and finally to smelters and refiners for recovery of the precious metals platinum, palladium and rhodium, as below.

scrap catalyst supply chain

Anecdotally, a scrap catalyst can pass through up to 5 middlemen before arriving at a smelter for processing. While such cases are possibly the exception rather than the norm, what is certain is that at each stage up the supply pyramid a margin will be extracted.

It is not difficult then to see how scrap catalyst dealers at the base of the supply pyramid will be affected, receiving a fraction of the cash value of the precious metals contained in their scrap catalysts.

There are of course many variations on the theme, though to demonstrate a possible cash price reduction down the supply chain, we consider a scenario whereby a scrap catalyst passes from
• vehicle breaker
• collector / dealer
• collector / pre-processor
• smelter

In an effort to not overstate the price reduction, two price mark-ups (10% and 15%) are considered and compared for each stage in the supply chain. While perhaps conservative, it seems a reasonable figure to cover costs and provide a modest (?) margin. Any comments or views on this are welcome in the section below.

Using these assumptions and considering the price received ‘at smelter’ as 100%, we see that at the base of this supply chain model, the vehicle breaker sees only between about 66% and 75% of the cash price ‘at smelter’. While the obvious solution for those at the base of the supply chain would be to cut out the middlemen, an alternative route to smelter is not always available.

For an overview of other factors at play in scrap catalyst pricing, follow the links to the posts on processing losses and metal market prices. To access information on our strategy for maximising the cash value of scrap catalytic converters, subscribe for FREE.