Why tolling can give you a strategic advantage within a volatile market.
By Joelle Boivin
If you’re recycling converters in today’s market, you might be struggling to decide if you should hoard your material or toll it. With slow market developments, we understand why most recyclers are choosing to keep their converters in-house until prices for platinum, palladium, and rhodium rebound. The truth is, however, that hoarded material doesn’t give you any strategic advantage.
Tolling, on the other hand, equips you with a sharper competitive edge and gives you a head start for when the market starts meeting your needs. We understand that tolling may feel like unknown land for some of you, and that’s why we’re peeling back the layers of confusion today. So, if you’re ready to get informed, keep reading.
What is Tolling?
Tolling refers to the process of securely banking your precious metal ounces for a period of time without hedging or receiving payment. That means that you’re shipping your converters to your processor, getting them processed, and only choosing to receive payment after your contract period has ended.
For example, if your processor has a contractual period of 150 days and you choose to toll, you cannot hedge or receive payment until your contractual period has ended. Once your contract period is over, you may choose to keep tolling or hedge fully or partially.
Tolled converters are processed and assayed, which means you get access to your troy ounce recovery figures once the analysis is completed.
Tolling is like treating your ounces like a bank, and it equips you with advantages that most recyclers aren’t aware of. Let’s take a look.
The Benefits of Tolling
Tolling allows you to hedge faster, avoid interest rates, and ensure the security of your material. We used PMR’s tolling options and benefits to help you better understand.
• Faster Hedging
Tolled converters are processed and assayed, which means you get access to your troy ounce recovery figures once the analysis is completed. With these figures, you can predict your converter returns based on the current market prices of platinum, palladium, and rhodium.
That means that when the market meets your needs, you have all the information necessary to hedge your prices quickly before the market changes again.
• Avoid Lease Rates and Interest
Because you’ve processed your converters and waited until your contract period is over, your processor holds physical ounces of your material. It’s for this reason that you skip right pass the lease rates and access spot pricing directly.
Tolling options only allow payment to be delivered after the end of your contract, which means you avoid paying interest whenever you choose to request payment.
So, if you’re going to hoard your material and wait for specific market pricing, why not choose to toll your material instead and avoid paying any interest?
• Secured Material
You deserve the peace of mind that comes with knowing your material is safe. When you toll your material, your ounces are kept safely with PMR, and you don’t have to worry about potential break-ins and theft.
Is Tolling Beneficial in the Current Market?
Tolling might be an option to explore if you want a strategic advantage.
While other recyclers will need to ship their material and wait for their assay results, you’ll already be ahead.
To help you make the most informed decision, let’s take a look at market figures and predictions.
• Extreme Volatile Conditions on the PGM Market
Market trends change all the time, but they’ve been extremely volatile since 2020. We’ve seen platinum dip below the $900 and then rise to $1,100 in a matter of months. Palladium has followed the same volatile trend as platinum, dropping from a high of $3,000 to $1,500 in a few months. Rhodium rose from $10,000 to $20,000 in a year only to fall back down to $15,000 after a few months.
Because the market moves so quickly, the data points to a need for speed. With prices rising and falling rapidly, you’ll want to have the agility to capture the trends that meet your needs before the market changes again.
• Market Predictions & How Tolling Helps You Stay One Step Ahead
In Johnson Matthey’s latest PGM report, they predict a return to a balanced market in 2023. Gradual recovery in new vehicle sales encourages the recycling of scrap vehicles and their converters, which means secondary supply of PGMs will rise. Industrial and automotive demand will remain strong, especially for platinum.
As for the market values of platinum, palladium, and rhodium, only platinum has kept an increasing trend. Since its dark days of spring 2020, platinum keeps hitting high values throughout the years. However, the researchers at Johnson Matthey PLC are hopeful for a return of palladium and rhodium prices!
The data shows a very gradual return to a strong PGM market. And once the market rebounds, you’ll want to be the first to capture those market trends without waiting to ship your converters and get your assay results. So, if you want to gain a strategic advantage that pushes you ahead, toll your converters and stack the odds in your favor.
For more information, visit PMR’s Resource Center at pmrcc.com/en/news-blog/.
With a background in advertisement, Joelle Boivin lends her feather to PMR, helping them break down complex industry terms and processes into informational content. PMR believes in equipping recyclers with industry knowledge, giving them the tools to gain more market share, grow their operations, and reach their business goals. And with Joelle on their team, PMR continues to be a customer-centric processor that helps recyclers reach above and beyond.
