The war in Ukraine could make catalytic converters more expensive
Palladium is a rare and precious metal that is used in jewelry, dentistry, flutes, and in catalytic converters that are part of car exhaust systems.
Russia is the largest palladium producer in the world, so after Russia invaded Ukraine, the price of the metal, like many other commodities, skyrocketed. Now it’s back to normal – at least, normal for 2022 – at around $2,500 an ounce. It is still five times more expensive than a few years ago.
Avo Bagramyan, who runs Avo’s Automotive in Los Angeles, said he had recently received one type of special call, and many of them.
“I get a phone call and someone says, ‘Hey, I went to start my car this morning, and it was very, very loud.’ And right away we can determine that “Hey, you know, that was a theft of a catalytic converter,” Bagramyan said.
Catalytic converters break down the most toxic parts of car exhaust. They cost up to a few thousand dollars and device thefts have increased dramatically. In 2021, State Farm Insurance said it paid $62 million for more than 32,000 stolen catalytic converters. This is 13 times more than in 2019, before the pandemic.
“The converter is full of very small amounts of rhodium, palladium, platinum, all these precious metals that when you break them down and recycle them and separate them, you know, it adds up,” Bagramyan said.
Bagramyan said the converters cannot be sold or disposed of very easily in the United States, so they are shipped overseas for recycling.
“You can get anywhere from $60 to $100 recycling a catalytic converter, but you end up costing the victim thousands of dollars in repairs,” he said.
Palladium, in particular, has become very expensive over the years. In 2016, an ounce cost around $500. In May of last year, that same ounce cost nearly $3,000.
“For the past five plus years, palladium has been in deficit, meaning the industry has consumed more on an annual basis than East come out of the ground and they burned the stocks,” said Chris Blasi, director of Neptune Global Holdings, a precious metals trader and exchange.
In a classic example of the interconnection of global supply chains, the price of palladium fell for a time last year because shortages of semiconductors meant automakers were building fewer cars and needing fewer catalytic converters. Then came the war, and Russia produces 40% of the world’s palladium, so when we feared that it would be cut off from the global supply, we panicked.
“And we’ve seen a wave of stockpiling,” said Kirill Kirilenko, precious metals analyst at CRU International in London.
The price hit an all-time high of over $3,300 an ounce at the start of the month. The fears seem to have subsided and the price has come down a bit.
BASF, a major producer of catalytic converters, told Marketplace its supply of metals from Russia was not affected, but if it was, the company could turn to other sources of palladium. Yet new supplies can take a decade to develop, and Kirilenko and other analysts are uneasy.
“We have seen a lot of sanctions imposed on Russia, but Russia is starting to fight back now,” Kirilenko said. “It would be interesting to see if he decides to restrict the supply of palladium.”
This could drive up the price of catalytic converters and make new cars even harder to get.
“I would say the supply chains for these critical materials like palladium are still somewhat at risk,” said Chris Berry, president of House Mountain Partners. Berry has been tracking metals for years.
Palladium will be important for a future hydrogen economy. Other metals like nickel – Russia is also a major producer of refined nickel – will be important for electric vehicle batteries. Berry said rising metal prices have already pushed back an important date: when unsubsidized electric vehicles become permanently cheaper than gas-powered vehicles.
“Many thought that date would be around 2025, but when you have multiple critical battery metals going parabolic from a price perspective, that tipping point will be delayed a year or two,” Berry said.
Meanwhile, Avo Bagramyan said if you have a car with a particularly easy-to-steal converter, like a Toyota Prius or Honda Element, you can buy steel plates to seal them up and keep them out of the reach of thieves. . It might not affect the global supply chain much, but it might just save you some money.