Precious Metals Remain Static

Changing usage patterns anticipated in the electronics and automotive markets will have a significant effect on the price and availability of precious metals during the next year or two. But despite general agreement about the coming changes, nobody expects the precious metals recycling market to roll over and die.

“The amount of precious metals used in plating circuit boards has been reduced. They are going to spot plating and miniaturization of boards,” says Richard Searle, vice president of sales and marketing for Handy & Harman’s precious metals division. The South Windsor, Conn., firm is a major player in the market. Searle notes that there continues to be a decrease in the amount of precious metals in most types of electronic components.

“Miniaturization of components and new manufacturing technology mean use of precious metals is going down,” says Kevin Beirne, vice president of sales and marketing for Sabin Metal Corp., Rochester, N.Y., another significant player in precious metal recovery and recycling. “Printed circuits used to be 18 by 18 (inches); now, they are 1 by 1 (inch).”

While the volume of material used per board is far lower than in the past, this trend is offset by the increased number of boards produced. “As purchasing power increases, demand increases as people get new toys. The amount of material from the electronics and photographic industries available for refining continues to increase,” Searle says.

While most observers would agree with Searle’s assessment, others note that there has been no immediate upsurge in market prices.

“The precious metals market has been depressed and the trend is downward,” says Griff Martin, CEO of Martin Metals, Los Angeles. He credits the low prices across the board to slowing of expansion in the economy and inflation being at a stand-still.

“It is a diminishing market, but it will never be totally gone,” continues Beirne. “The market will remain where there is a need for contact resistance and no oxidation. But the people doing what we do will decrease. There will be fewer companies like ours, but handing more volume.”

GOLD

One factor currently affecting the gold market is the amount of metal exported from Russia, according to Martin. On top of the South African gold production, which controls the market, recycled materials are a relatively small part of the price equation.

Conversion of old gold scrap to refined gold provided about 75 metric tons of metal to the market in 1994, according to John M. Lucas, gold specialist with the U.S. Bureau of Mines. This was roughly equivalent to 75 percent of domestic gold consumption. The balance of secondary production was from prompt industrial scrap, partly toll refined.

The primary use for gold remains personal adornment and coinage. About 71 percent of the gold used in 1994 went to jewelry and coins. The main manufacturing use for the metal is in the electronics industry, which used 22 percent of the total. Dental uses make up about 7 percent.

Demand for circuit boards from computers will increase, predicts Les Cline, manager of catalyst refining for Sabin. “New people are getting into the supply side of computer board recycling and I expect there will be more of it,” he says. His firm certainly is a factor in the electronics business. Andy Sabin, president of the firm, makes frequent trips to Russia to purchase computer parts. Many of the outdated computers in the CIS contain more gold in their circuit boards than the more modern ones in use today. This is because gold was needed in early technology to assure the quality now available with other materials.

Martin agrees that computer parts contain increasingly less gold. “We used to get 3 percent gold from computers. Now I’m lucky to get 5 to 15 ounces per ton,” he says.

It might not be long before recyclers are lucky to get any precious metal back from such components. Searle points out that European manufacturers are going to DFE (Design for Environment) with computer, cellular phone and other components being 100 percent reused, not recycled. That is, the circuit boards are being snapped into new products after testing rather than being broken down for their components.

In addition, the number of metal components, like screws and nuts, is being reduced as well since manufacturers are going to press-fit assembly. Plastic cases, with recycling identifiers molded into them, are common. This cuts the amount of common metals to be reclaimed.

However, Martin predicts that for many uses – satellites, for example – industry will stick to the tried-and-true value of precious metals. “The government can’t have a failure on a bird a hundred miles above the earth just because someone saved a few bucks on materials,” he notes.

Even with the changes it has been a decent, if not impressive, year for gold prices. During the first 10 months of the year, the Englehard Industries/London daily price of gold ranged from a low of about $371 per troy ounce, set in April, to nearly $400 reached in mid-June. According to Lucas, factors contributing to the generally high prices relative to the previous year were recurrent reports of increasing inflation, continued weakness of the U.S. dollar relative to other currencies, changes in global gold supply and demand, and occasional heavy buying by international commodity funds. Late fall prices hovered in the $387 to $397 range.

SILVER

Silver remains weak because demand has never returned to where it was 20 years ago. “Silver has never gotten back to the 196 million ounces consumed by industry in its peak year of 1973,” says Walter Frankland, executive director of the Silver Users Association, Washington, D.C. “It was 130 million ounces in 1994 and we’re looking at just 5 or 6 million more ounces in 1995.”

However, he notes that recycled silver is essential as a market stabilizer since the amount of silver consumed annually still exceeds what is taken out of the ground. About 2,000 metric tons of silver was recovered from recycled material in 1994. That’s roughly equivalent to half of the apparent demand for refined bullion.

Photography remains the main source of demand for silver, consuming 50 percent of annual production. Another 20 percent goes into electronics, 10 percent into electroplated ware and jewelry. Although a dive in photographic use of silver and the resultant demise of the silver market long has been predicted, according to John Lutley, executive director of The Silver Institute, Washington, D.C., there was a 3 percent increase in silver-based photography, consuming 206 million ounces, in 1994. Some experts predict annual growth in silver-based photography in the 4 percent to 6 percent range. Blanket distribution of movies has required many more prints of each film, strengthening demand.

In 1994, the average silver price increased for the second consecutive year. Growth in the economy and increased investor demand were cited as reasons by the Bureau of Mines, although many in the industry question why the price hasn’t increased more.

“Demand for silver exceeds what is being mined,” says Handy & Harmon’s Searle. He notes the price has risen from under $5 per ounce to current levels and says it may increase further.

“The trend is toward a tighter market,” says Corby Anderson, chief process engineer for Sunshine Mining & Refining Co., Kellogg, Idaho. “We would see more silver if the silver price would go to a more normal level. It is poised to do that.”

Sunshine restricts its purchases of recycled materials to larger clients. However, they are actively pursuing the market and have solicited markets and advertised for silver, seeing most of their supplies come from the photographic industry.

While he notes that supply is competitive right now and that business is picking up, Anderson says that environmental concerns will force more silver into the recycling stream. “Discharge of silver into the public waste system is going by the wayside,” he says. “By and large, it will be stopped – making that one source which will grow a lot.” Even marginal silver supplies will be turned over to recyclers, he adds.

“I don’t visualize any large incremental increases in recycled silver supplies,” agrees Frankland, noting that any gains from new uses have been offset by substitutions. “We are still using silver at the same rate as in the 1960s,” he concludes.

PLATINUM

Les Cline, at Sabin Metal Corp., notes that there are two types of “recycling” of platinum-group metals in the industry. He questions whether the first – recovery of catalysts for oil refining and hydrocarbon cracking – is true recycling since the oil company owns the precious metal and drives the whole process, retaining ownership of the material throughout. However, the second – recovery of auto catalysts, which might ordinarily go on the scrap heap – more closely meets the classic definition of recycling.

“Catalyst material is so lean that few people can extract it,” Cline says. He points out that 30 converters are made from one ounce of platinum; 100 converters from a single ounce of palladium; and 300 from an ounce of rhodium.

Nationwide, about 3,000 kilograms of platinum-group metals (including platinum, palladium, rhodium, ruthenium, iridium, and osmium) was refined from scrap on a non-toll basis in 1994. The quantity of toll-refined secondary was considerably larger – about 60,000 kg, according to J. Roger Loebenstein, platinum-group metal specialist for the U.S. Bureau of Mines. He notes that several large collectors purchased used catalytic converters from numerous small collectors, auto salvage yards and muffler shops. The outer shell of the converters is recycled while the catalyst and substrate are shipped to extractors to recover platinum, palladium and rhodium.

Cline says worldwide demand for platinum should double in the next 10 years, following a doubling of demand from 1975 to 1995. He is careful to point out that this is a global figure, not a U.S. figure. The United States has been in the converter business for years, but other areas of the world are just getting into the business and this will drive demand.

“The catalyst that best suits us is chemical catalyst refining – pharmaceuticals and specialty chemicals,” he says. The precious metals are supported on carbon and they recover the precious metal.

That doesn’t mean the market will be an easy one, though. Things were tight in the salvage catalytic converter recovery market this year, mainly due to the mild weather last winter. This mild winter suppressed demand for, and prices of, rebuildable and reusable auto parts and this, in turn, suppressed the number of vehicles dismantled as dismantlers cut back in hope of a price rebound. Consequently, fewer used auto parts, including salvage catalytic converters, came to the market.

However, there is major structural change on the horizon. Auto manufacturers are going to a more palladium-intensive catalytic converter, so the value of precious metal per car most likely will drop considerably in the next few years.

“Two to three years from now we will see a lower grade converter coming into the pipeline,” predicts Ashok Kumar, venture manager for A-1 Specialized Services, South River, N.J. “Overall there will be less OEM demand for platinum as the application changes, and later it will be difficult to buy high grade material since there will be less of it. Also, it will be tough for the guys at the yards to estimate the value of the catalysts they are sitting on,” he continues. “They will have to categorize things differently and change their habits.”

However, A-1 still sees the salvage automotive catalyst value-recovery industry as being healthy and getting healthier, but not without struggle and concern.

Automobile manufacturers are talking about using palladium in addition to platinum, confirms Ellen Zadoff of Johnson Matthey, Wayne, Pa., a major manufacturer of catalytic converters and other products made with platinum-group metals. However, she says it will be four or five years before any change is seen in the recycling business. “The average age of a car is eight years,” she notes.

While Zadoff does see a change in the material composition of converters, she questions whether there will be a substantial drop off in the value of a recycled converter since palladium is used at a rate of 1.5 to 2 times the amount of platinum. “It remains to be seen,” she says.

Platinum prices were up in the $472 per ounce range in July with the November price pegged at $402.50. Palladium floated in the $136 to $172 range, with supplies coming out whenever the material hit $160. Rhodium prices were the worst of the group, averaging about 10 percent of their levels of five years ago.

“Overall, competition is intense,” Kumar says, adding that he feels 1996 will be a good year. “Prices may not go way up, in fact they may even go downward,” he says. “But supplies should be ample. ”

He says that the high prices being paid for converters and catalyst does not appear to be due to overpricing. Rather, he says it is due to healthy competition arising from excess capacity in key segments of the auto catalyst recovery industry – particularly collection, lot consolidation, metals extraction and metals refining.

A-1 has responded by replacing its crushing, grinding, sampling system; cooperating more fully with downstream processors; and intensifying marketing efforts, including expansion into Western Europe.

Kumar says the trend to higher processing yield should continue and more platinum-group metals should enter the market from both the auto and non-automotive sources.

On the other hand, there remains intense competition in the market. Stringent environmental controls on processing and growing diversity of supply are other factors which must be considered by those who expect to be playing in the precious metals market in years to come.

“Only those with the environmental will to continue will stay in business,” Beirne concludes.

 The author is an environmental writer based in Strongsville, Ohio.

Queen Of The Silver Dollar?

A new market may be one way to shake silver out of the doldrums. Just for fun, we asked several market experts what would happen if the U.S. government issued a new silver one dollar coin, perhaps an update of the Susan B. Anthony dollar. To contain a dollar’s worth of silver, it would have to be cladded. About 10 percent of the coin would be silver, the rest copper.

“Minting a silver dollar coin is beyond the realm of possibility,” states Walter Frankland, executive director of the Silver Users Association, Washington, D.C. “Even if they did, it probably would not circulate. If that was the purpose, okay ... but there is more value to silver than its use as small change.”

“The only way I can see the government issuing a silver coin is as a commemorative coin,” agrees Griff Martin, CEO of Martin Metals in Los Angeles. “The government only makes money on coinage when the intrinsic value of the metal is low compared to the value of the coin.”

If they mint it, will consumers use it? If the history of the Susan B. Anthony coin is any indicator the answer is a resounding “NO.” At least in the near term, look for silver coins as Christmas presents or collectors’ items, not for change in Coke machines.