The catalytic converter has been required on all U.S. autos since the 1975 model year, which began manufacture in 1974, following the passage of the Clean Air Act of 1970. Similar legislation was also enacted in Japan in 1975, while converters were first mandated in the EU markets in 1992 and elsewhere beginning in the early to mid-1990s. Nearly all developed countries and most developing nations have now adopted some form of anti-pollution legislation that requires the use of catalytic converters. Euro 3 and Euro 4 regulations, or comparable surrogates, are the most commonly implemented programs in the developing markets.
Since 1974, it has been estimated that more than 140 million ounces of platinum and palladium have been consumed globally in the manufacture of the automotive converter. Currently, some 9 million ounces of both platinum and palladium, about two-thirds of total new primary supplies of the metals, are used in pollution control applications.
Major producing nations, including the U.S., Japan and the EU countries, have already enacted legislation that mandates the proper salvage procedures for end-of-life vehicles (ELV) that ensure most of the vehicle's parts can be recycled. EU regulations, for example, now require that 85 percent of the value of an ELV be recycled, up from prior levels of 55 to 65 percent, and for a further rise to a level of 95 percent of a vehicle's value by 2015. Producer responsibility regulations mandate that auto manufacturers establish collection networks to take back ELVs from the last registered owner of a vehicle at no cost and to dispose of the vehicle in an environmentally responsible manner; the last owner of the vehicle can still opt to sell the vehicle to the local salvage yard if some compensation is offered. Most worldwide initiatives outline a strategy that would enable the recycling industry to achieve a 95 percent reclamation rate for the value of an end-of-life vehicle, specifically requiring the removal of the auto catalyst (autocat) during the treatment process, by the year 2020.
Established and Developing Markets
In the U.S., the Department of Justice initiated a program to better regulate the flow of the deregistration and scrapping of salvage vehicles to protect against fraudulent activity. The National Motor Vehicle Title Information System (NMVTIS) requires any salvage yard that collects more than five cars per year to report certain pertinent information, such as the vehicle identification number, name of last owner, date surrendered and the eventual disposition of the vehicle, whether crushed or resold. Data are required to be submitted to the NMVTIS on a monthly basis. Data collected by the NMVTIS indicate that during the past 30 months an average of 11.24 million vehicles per annum have been surrendered for recycling in the U.S. Maintaining a repository of current information on ELVs can lead to greater efficiencies in the recycling process.
Current ELV directives also stipulate that manufacturers should design new vehicles to contain more recycled material and to be built in such a way as to be more efficiently disassembled and recycled. New cars also should contain less hazardous materials that make disposal more difficult and expensive. By consistently raising the efficacy of automotive recycling and, in turn, the rate of recovery of spent autocats, the PGMs (platinum group metals) used for catalytic purposes come closer to being regarded as a renewable resource.
Autocat recycling initiatives have begun to evolve in the developing nations as vehicle ownership continues to rise. In China, for example, it has been estimated that some 900,000 to 1 million cars are currently being disassembled each year, which is believed to represent nearly 80 percent of available end-of-life vehicles but only some 5 percent of annual new car sales. By comparison, the approximate 11 million cars recycled each year in Europe equates to 75 percent of annual sales. And despite the annual sales of new vehicles in China climbing to a record level of nearly 19 million in calendar 2011, the country's contribution of salvage autos to global recycling totals will be modest, perhaps even for most of the next decade. This disparity can be explained by the fact that only 2 million cars were produced in China 10 years ago, leaving present availability of retired vehicles at a minimum, and that the demand for functioning used cars is quite high given the growth in personal wealth. Industry consultants Wards Auto estimates that 78 million registered cars remain in operation across China, an amount that could continue to increase by 20 million per year. Undoubtedly, the rate of automotive recycling in China will rise later this decade as more end-of-life vehicles make their way to market. Given the smaller engine size of the autos produced for the Asian markets, palladium will again likely be the most abundant of the PGMs recycled from salvage autocats in China and elsewhere in the East.
Expected to Increase
The rapid increase in the amount of metal reclaimed from spent autocats experienced during the past several years is expected to continue for some time. Improved efficiencies in the collection process, more attractive pricing opportunities, broadening environmental regulations, an increasing commercial need for the metal and a growing pool of aging automobiles, all on a global basis, should collectively support the further significant growth in the recycling of the PGMs used in the automotive sector.
Palladium from recycled converters is expected to continue to grow at a faster pace than that of platinum or rhodium for the next several years, a consequence of the proportionately heavier loadings of palladium used in the manufacture of converters in the late '90s. In the latter half of this decade, however, the immense above-ground stocks of platinum currently stored in European diesel converters will start to become available for recycling, and the quantity of recovered platinum should then enter a period of comparative growth. Moreover, this change in the balance of recycled PGMs also will be reflective of the decrease in palladium usage in the first half of the past decade, as illustrated below, resulting from supply disruptions and the consequent spike in the price of the metal in 2000 and 2001.
And given our assumption of a 14-year average car life, the amount of palladium sourced from recycling should rebound in the period beyond 2020 as the marked increase in the use of the metal in converter manufacture during the past few years is recovered. Additionally, some measure of increase in the flow of salvage converters from China also may be expected to commence in the next decade, and with its greater mix of palladium to platinum used in converters, the majority of the PGMs reclaimed will be that of palladium. And if we assume that more than 1 million ounces of palladium are currently required for autocat manufacture to accommodate China, then even a 20 percent recycling rate of these converters will have a significant accretive effect on overall secondary supplies available going forward.
Worldwide, it has been estimated that as many as 1 billion cars and trucks are still functioning, owing in part to a greater demand for used vehicles and cars overall, particularly in developing countries and in part to the inefficiencies of the recycling process. Consequently, the projected long-term rise in vehicle sales should bolster the already sizable volume of vehicles that are potentially available to be scrapped and recovered. And the consistently higher annual rates of recycling of autocats may one day render the metal required by the auto sector to be regarded as a renewable resource.
Recycling volumes have improved substantially during the past year as a result of solidly higher metal prices, up from the trough of 2008, better market efficiencies and more stringent end-of-life regulations. A-1 estimates palladium sourced from the recycling of scrap converters could see a 20 percent increase in 2012, rising to 1.62 million ounces, up from 1.35 million ounces in 2011, to a record level that ranks third in size only to Russian and South African primary mine production. Platinum totals from recycled converters could rise to 1.2 million in 2012, from 1 million last year, while rhodium could see a 15 percent increase to 260,000 ounces from 225,000 ounces in 2011.
A-1 Specialized Services & Supplies Inc., Croydon, Pa., is a recycler of PGMs from salvage catalytic converters and a marketer of platinum, palladium and rhodium. More information is available at www.a-1specialized.com.