The recycling of global platinum group metals (PGMs) is a business that SA producers — which dominate the supply of the mined metals — will find difficult to enter and let alone control.
The recycling of PGMs mainly entails extracting platinum, palladium and rhodium from autocatalytic devices attached to the exhaust systems of petrol and diesel engines, and which scrub out pollutants and greenhouse gases.
According to data from Johnson Matthey, one of the largest makers of catalysts and a major PGM recycler, the reuse of these three metals from autocatalysts has grown to nearly 5-million ounces a year from about half that a decade earlier.
One of the reasons was big companies relying on supplies of PGMs from SA, Zimbabwe and Russia built refineries to develop alternative sources of these metals outside what are regarded as risky jurisdictions.
SA alone supplies close to 8-million ounces of the three metals, putting into context the size and importance of the autocatalyst recycling industry for those wanting to reduce their exposure to any supply shocks from SA.
In SA, mining companies face electricity shortages, ageing mines, a dearth of new projects after a decade of low and stagnant metal prices and growing instances of community unrest disrupting production.
SA producers have strategically tied up the PGM output in their domestic market, Zimbabwe and North America, three of the world’s four main PGM mining areas, which includes Russia where Norilsk Nickel holds sway.
But for recycling, SA — where the large primary refineries are based — is too far from the key recycling markets in the US and Europe. Any serious entry into the recycling business would require a purchase of a refinery and reliable spent catalysts supply chains in those geographies.
Impala Platinum was once a major player in the recycling market, sourcing scrapped and crushed PGM-bearing autocatalyst material from the US, where a company called A-1 had a close relationship with car companies, providing a ready source of spent catalysts.
The relationship between Implats and A-1 started in the mid-1990s when recycling was in its infancy. Little more than a decade later the partnership crashed and resulted in an acrimonious battle in a US court fought over three years and was decided in the SA company’s favour in 2016.
For Implats, what was a good business that started with small but decent profit margins quickly turned into a risky, barely profitable business that became increasingly difficult and competitive as other recyclers entered the market, says the company’s group executive of corporate affairs Johan Theron.
The lessons taken from the foray into recycling mean Implats is unlikely to rush back into the business when there are better profit margins to be had from mining over which the company has full control, he says.
For companies such as Johnson Matthey, BASF, Umicore and Heraeus, which have businesses outside recycling by making and supply catalysts and other products to carmakers for example, there are alternative revenue sources to offset the tiny margins in reprocessing PGMs, he says.
A difficult market to crack open
The difficulties in setting up cash-on-delivery collection points in Europe or the US to deliver a steady stream of catalysts, processing the catalysts by stripping off the steel casings and crushing the internal workings into a powder, shipping bags of material to SA and then to inland smelters and refineries made the financial model virtually impossible for SA companies to consider entering the business, he says.
The difficulties are compounded by a new substrate used to make catalysts called silicon carbide, which is tougher to separate from the PGM coating. “Silicon carbide needs a much higher temperature and it becomes like a glue in the furnace,” says Theron.
That said, Northam Platinum, headed by CEO Paul Dunne, who used to work at Implats and was intimately involved in the recycling business, has bought the A-1 assets and has slowly started collecting and shipping catalytic material to SA.
Sibanye-Stillwater is the largest producer of the six metals that make up PGMs. Over four years it went from nothing to the world’s largest, with mines, concentrators and refineries in SA, Zimbabwe and the US, bought in four big deals.
Its US Stillwater palladium and platinum mining and processing business has a large recycling arm, built originally on material from A-1 that was diverted from Implats to achieve better prices and margins. Stillwater recycles about 680,000oz a year of platinum, palladium and rhodium combined.
“The best way to describe the recycling market is ‘opaque’. There’s a lot of smoke and mirrors,” says Justin Froneman, CFO of Sibanye’s platinum division, declining to be too specific on Stillwater’s recycling business.
The high level of working capital needed to source the catalysts at prices close to spot market prices and then a wait of 90 to 120 days to realise income from the metal posed a risk of being caught on the wrong side of PGM prices, Froneman says.
Anglo American Platinum, which is 80% owned by Anglo American, does not participate in recycling.
“Typically, recycled automotive catalytic converters are collected and then processed near to where the car was originally scrapped, rather than incur the time and cost of shipping material for further processing in SA,” said Anglo American’s head of sales and market insights for PGMs, David Jollie.
“From an Anglo American Platinum perspective, recycled material needs to compete in economic terms and for limited processing capacity with our own mined ore and this means that low-grade recycling has not been a priority for the company,” he says, adding the company was looking for “attractive commercial opportunities” to enter the business.
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