Treasure trove: precious metals are zooming to values that may soon have recyclers seeking buried treasure.

Wherever the price settles out, the supply-and-demand picture for platinum group metals (PGMs) says the catalyst market will thrive in the immediate and longer-term future.

One key statistic to watch is whether demand, especially from new auto production, outstrips production from mines and old aura retirement.

Despite the pep in the catalyst market, the real winner this year in the precious metals market has to be silver ... with gold hard on its heels. Silver markets generated excitement a couple of months ago, reaching their highest price levels in nearly a quarter century--with silver topping $11 per ounce in late March for May contracts, But silver was just picking up momentum. Silver zoomed to more than $12.50 by mid-April. Prices had not hit that level since 1983. But it wasn't done yet. Silver kept right on going to $14.50 per ounce on the spot market--a full 100 percent above its April 2005 price.

Gold, too, was on its way to prices unseen in more than two decades. Gold broke the $600 level in mid-April and continued to climb, breaking through $632, That's a whopping 46-percent increase from last year's spot price, Kids graduating from college today have not seen prices for gold of silver this high in their entire lifetimes (the last time gold was that high was 1980).

However, when it comes to volume and tonnage, the automotive catalyst business continues to hold center stage for recyclers.

Although the numbers are not as impressive on a percentage basis, the price of platinum was well above $1,100 per ounce, pushing toward $1,130 and above. That is more than 25 percent above the market price a year ago.

AUTO CATALYSTS. "The autocatalyst recycling industry has grown significantly over the past decade as greater efficiencies in the recycling process, benefiting from improved PGM and scrap prices, the continued rise in the availability of retired or scrapped autos and more restrictive and proactive regulations abroad, have collectively fostered the expansion," according to Ashok Kumar, Director of A-1 Specialized Services & Supplies Inc., Croydon, Pa. "The recycling industry is maturing as it becomes increasingly more global in its reach. The supply of salvage autocats is not only sourced from the United States, Europe and Japan, but also now flows from Eastern Europe, Australia, New Zealand and a growing number of countries in Asia and Latin America."

Kumar says that availability of reclaimed metal from salvage autocats has grown dramatically throughout the past 30 years, since the installation of the first catalytic converters in 1975. There is no end in sight.

According to figures from Johnson Matthey, a specialty metals company based in Hertfordshire, UK, auto-catalyst demand for platinum was pegged to climb by 8 percent to 3.86 million ounces in 2005. That marked the sixth annual successive increase in demand.

Johnson Matthey sees the demand coming from rising sales of light-duty diesels in Europe and tighter restrictions on emissions from light- and heavy-duty diesels worldwide.

Meanwhile, the specialty metals company sees palladium use dipping 1 percent in 2005 to 3.69 million ounces. This is mainly because of a drop in purchases by European auto makers. Johnson Matthey notes that Chinas projected growth in light-vehicle production will add fuel to the fire lighted under platinum consumption and will help offset much of the loss in demand in Europe.

What goes into catalysts also comes out--whether platinum or palladium.

"We estimate that by the year 2010, some 2 million ounces annually of palladium will be derived from the recycling of spent autocats, representing nearly one-fourth of new mine supplies of the metal," according to Kumar.

He adds, "Greater amounts of palladium should become available for recycling in coming years as many of the cars manufactured in the late-1990s through 2001, those with converters containing higher loadings of palladium, reach the salvage yard. Additionally, in only four year's time, some 1.1 million ounces of platinum and 200,000 ounces of rhodium will also be recycled each year."

Prices for the small dealer tend to be all over the charts, depending on demand at the moment. From Pennsylvania through the Midwest, the demand for large foreign catalysts seemed hot this spring. Jobbers reported getting as much as $125 for large foreign catalysts and $84 for those from small foreign cars. Large GM catalysts were bringing $77, and the large domestic catalysts (mainly Chryslers) fetched $52, with small domestic catalysts (Fords) at $42.

These prices varied from site to site and represent payment on less-than-load quantities.

AUTOMOTIVE DEMAND. "The demand for platinum, palladium and rhodium in the manufacture of autocats has increasingly defined the PGM markets. We estimate that nearly 60 percent of newly mined platinum will be consumed by the auto industry in 2006, along with 65 percent of palladium supplies," Kumar projects. More surprisingly, he expects autocat demand for rhodium to exceed available mine output this year, perhaps even for the next few years.

Further, Kumar states that "platinum and rhodium consumption from the autocat sector is projected to grow by some 8 to 10 percent annually throughout the intermediate term, while, in contrast, supplies of primary metal are expected to expand by only 4 to 5 percent."

Auto sales in the developed markets of the United States, Europe and Japan will likely continue to expand at a 1 percent to 2 percent pace in coming years. But a marked increase in demand for new cars will be found in the developing nations, specifically in China, India and other Asian and Latin American countries. Worldwide auto sales have been estimated to reach 100 million units annually by the year 2020, with more than 1.5 billion registered autos.

The U.S. Department of Transportation projects that the number of global registrations could swell to more than 3.5 billion by 2050, assuring a potential steady supply of salvage autocats for the distant future.

RECYLCING LEGISLATION. More stringent emissions standards as mandated by the implementation of U.S. Tier 2 and Euro 4 regulations will require greater loadings of platinum, palladium and rhodium to reduce hydrocarbons, carbon monoxide and nitrous oxide levels in engine exhausts. Tier 2 standards apply to all passenger cars, SUVs and light trucks in limiting nitrous oxide levels and other pollutants. Starting in 2007, regulations will target diesel engines and heavy-duty vehicles.

In Europe, the introduction of Euro 4 standards in 2005 will act to halve current emission levels of nitrous oxides, particulate matter and carbon monoxide in both passenger cars and in diesel engines.

"The EU has already begun discussions on the proposed new Euro 5 standards that will take effect in 2008," Kumar notes. He says the proposed standards call for an 80 percent reduction in particulates and a 20 percent decrease in nitrous oxides for diesel engines and a 25 percent cut in nitrous oxides and hydrocarbons for gas engines.

"The current rate of recycling of more than 27 million vehicles per annum accounts for only about one-half of global new car sales, owing to the remaining inefficiencies of the recycling process and a greater demand for used vehicles and cars overall, particularly in developing countries," adds Kumar.

Governmental regulations and recycling programs to improve recycling rates are currently being established. In the United States, for example, the Department of Energy has outlined a strategy that would enable the recycling industry in the United States to achieve a 95 percent reclamation rate for the value of an end-of-life vehicle (ELV) by the year 2020.

The European Union's Directive on End-of-Life Vehicles mandates that the last owner can deliver the ELV to an authorized treatment facility without cost and be issued a Certificate of Destruction verifying the proper disposal of the vehicle. By 2007, the responsibility of recycling and the cost of treatment will have to be assumed by the vehicle manufacturer. The goal set by the EU calls for 85 percent of the vehicle's value to be recycled by 2006, up from prior levels of 55 percent to 65 percent, rising to a level of 95 percent of a vehicle's value for 2015.

Similarly in Japan, the Automotive Recycling Law that began enforcement in January 2005, requires the licensing of recycling businesses and the collection of lees from the owner of the vehicle to compensate for eventual disposal costs. The objective of the new law is to raise the recycling rate in Japan to 95 percent by the year 2015.

MOUNTING CHALLENGES. Along with the increasing supply of salvage autocats, particularly from Europe, and the recent cyclical high prices in the PGMs comes a heightened competitive environment in the autocat recycling industry. In April 2006, the platinum price posted a high of $1,130 per ounce, palladium recorded a four-year high of $370 per ounce, while rhodium hit a 15-year high of $4,800 per ounce.

"The higher market prices for the metals, and in turn the converters, have attracted new entrants to the marketplace and have caused a greater variation in material pricing," Kumar says.

"This increased pricing risk is a consequence of the often volatile precious metals markets experienced over the past year," He says, "For example, a 4 to 5 percent error made when bidding on new material is far more costly when platinum is $1,050 per ounce than when the metal was trading at $850 per ounce just 12 months ago.

"Moreover, market-savvy suppliers may expect to be compensated for any sharp upward moves in prices that may occur subsequent to delivery agreements, but alternatively, would be unlikely to accept a re-negotiated price in a declining market," Kumar says.

"Further complicating an already difficult task is the more than 1,000 different converter styles manufactured over the past 30 years that could be delivered to our facility each day," Kumar says of A-l's incoming material.

Kumar summarizes the PGM market by stating that "the continued growth in PGM demand for an expanding auto sector and for the requirements predicated by tighter emissions standards worldwide will likely work to sustain a firm tone to the metals markets."

He adds regardin the future, "Any downward correction in PGM prices would be expected to promote greater consumer interest, thus limiting our downside price risk.

"Attractive metal prices in concert with newly enacted government recycling initiatives should result in the continued healthy pace of global expansion in the autocat recycling industry for many years to come," Kumar concludes.

SILVER AND GOLD SHINE

There is some question as to whether the uptick in the silver and gold markets is being caused by the general uncertainty in world politics of whether it is a case of all markets floating higher and the tide lifting all boats.

Silver prices continued to climb through the early part of the year with late April prices spotted at $14.50. Meanwhile, gold markets saw a similar upturn, breaking highs in the $630 range.

Part of the price increase is likely to be bad news for recyclers. Some analysts say the boost in gold and especially silver prices traces back to the new exchange-traded funds (ETF) tied to gold and silver. Nothing is more vexing to a recycler than seeing markets rise and rail on the whim of the investing, speculating--or, some would say "gambling"--public.

In this case however, the ETF must buy enough hard silver or gold to cover its investment capitalization. So there will be demand for physical product, whether from mines of from metal recovered at recycling yards

Meanwhile, the price of gold was holding firm north of $600. Gold always glitters in times of uncertainty, and some market analysts are pointing to the uncertainties in the U.S. economy, coupled with increasing interest rates, as the reasons behind the higher prices.

HABER ANNOUNCES INTENT

Haber Inc., a high-tech process development company based in Arlington. Mass., has signed a letter of intent with North Carolina's Global Transpark Authority for an 18,500-square-foot industrial building at the Global Transpark in Kinston. N.C.

The letter of intent initiates in-depth meetings with the governmental authorities, which upon successful conclusion, could lead to a long-term lease for a Haber plant that will recover metals from obsolete electronics.

Should Haber lease the new facility, the company plans to install at least two metals recovery lines, one or more for electronic scrap and one for gold ore, for commercial production and bulk pilot operations. Haber's technologies will be used to extract and recover precious metals from multiple tons of gold concentrate and electronic scrap per day.

The site will serve as a production and pilot facility and as a training facility for Haber employees, providing employees who will De operating other plants located around the world with first-hand experience on its processing technologies.

TECK COMINCO BIDS FOR INCO 

Teck Cominco Ltd,. based in Vancouver, has announced that it will make a CDN $17.8 billion cash and snare offer to acquire all of the outstanding shares of Inco Ltd. conditional on Inco not completing its announced takeover bid for Falconbridge Ltd.

Under the offer, Inco shareholders will receive $78.50 per common snare in cash or shares. $28 in cash and 0.6293 of a Teck Class B subordinate voting share at full pro ration. Accord to a press release from Teck Cominco, "the business combination, with a pro forma enterprise value of approximately $35 billion, will create a broadly diversified Canadian-based mining company with market-leading positions in zinc, nickel and metallurgical coal and a significant presence in copper, gold and other commodities."

Teck Cominco will finance the cash portion of the offer using its cash resources and an underwritten bridge facility.

Full details of the offer will be included in a formal offer and takeover bid circular to be mailed to Inco shareholders in accordance with applicable securities laws.

The author is a Recycling Today contributing editor based in Cleveland. He can be reached at [e-mail].