Converter Assay Terms Explained

Most yards sell cats one of two ways. A buyer pays a set price for each unit, or the load goes to a processor and you get paid on what the lab finds inside. That second way is selling on assay. It can pay well. It can also leave you holding a settlement sheet full of terms nobody explained. This guide covers the common catalytic converter assay terms, from treatment charges to lease rates, in plain language. It shows how a settlement gets built, so you can ask better questions before you ship.

Selling by the piece vs selling on assay

When you sell by the piece, the buyer looks at each cat, often by the code stamped on the shell, and offers a price per unit. You know your number before the load leaves. The buyer takes the risk that the metal inside comes in low.

When you sell on assay, the processor opens the cats, measures the precious metal and pays you on that result, minus the agreed charges. You take on more of the risk. You also keep more of the upside when a load comes in rich.

Neither way wins every time. It depends on your volume, your mix, how well you know the buyer and how long you can wait to get paid. SMASH founder Jeffrey Zwirsky named the real issue in a Q&A with Recycling Product News:

"Every converter model is made up of different materials, but to most people, they look like rusty pieces of metal."

What happens to a load at the processor

Most assay lots follow the same basic path.

1. Weighing. The load is checked in and weighed. Keep your own scale ticket to compare.
2. Decanning. The steel shell is cut open and the catalyst comes out. In most cats that is a ceramic block, often called the substrate or monolith.
3. Milling. The ceramic is crushed to a fine powder and blended so the lot is as even as possible. This is also called homogenizing. It matters because a small sample has to stand in for the whole lot.
4. Sampling. Samples are drawn from the blended powder. Many processors split the sample, so one portion can go to your own lab and another is held back in case of a dispute.
5. Moisture. Milled material can hold water. The processor measures it and deducts it, so you are paid on dry weight.
6. Assay. A lab measures how much platinum, palladium and rhodium is in the sample, often in parts per million. Apply that to the dry weight of the lot and you get the metal contained.

The terms on a settlement

The settlement starts with the contained metal and works down to what you get paid. Names vary by buyer, so ask what each line means.

• Return rate or payable rate. The share of the contained metal you get paid for, often set separately for each metal. Part of the gap reflects metal lost in processing and refining. The rest is a commercial term you can negotiate.
• Treatment charge. A fee for handling, decanning, milling and sampling, often tied to the weight of the material.
• Refining charges. A fee for refining the recovered metal, often charged per troy ounce and different for each metal.
• Metal lease or finance charges. Refining takes time. If the buyer pays you before the metal is recovered, they carry that value in the meantime. This charge covers those days. It usually follows market lease rates, which can change quickly.
• Settlement timing. How long from delivery to final payment, whether you get an advance first, and which day's price is used.
• Lot minimums. The smallest load a processor will run as its own lot. A smaller load may be combined with others or cost more to process.

Where hedging comes in

Metal prices move every day, and a load can take weeks to reach final settlement. Hedging is one way to deal with that gap.

If your price floats, you get the market price on the pricing date in your terms, often at or near settlement.

If you hedge, you lock a price earlier, often when the load ships or arrives. Nobody knows the exact metal content yet, so the lock is usually placed on an estimate. When the final assay comes in, the difference is usually settled at that day's market price. Ask how a hedge is priced and how it shows on the settlement.

A hedge cuts your price risk. It does nothing about assay risk. As Zwirsky said in the same interview, "Treatment charges, metal lease rates, and hedging make assay terms hard to follow, and all affect the result."

Why the final value is hard to predict

Two loads that look the same on the scale can settle very differently:

• Every converter model carries its own mix and amount of metal.
• Original equipment cats, aftermarket cats and diesel units are not the same material.
• The mix of models changes from load to load.
• Moisture and sampling each add some uncertainty.
• Prices and lease rates move between shipment and settlement.
• Every buyer sets its own charges and return rates.

That is why, in Zwirsky's words, "You can't simply weigh a load and check a market screen."

Questions to ask before a load ships

1. Are you buying by the piece, on assay, or both?
2. What is the return rate for each metal?
3. What are the treatment and refining charges, and how are they worked out?
4. Are there lease or finance charges? For how many days, and at what rate?
5. Which day's price applies? Can I hedge, and on what basis?
6. When do I get an advance, and when is final settlement?
7. What is the lot minimum?
8. Can I get a split sample? What happens if my lab disagrees with yours?
9. Who pays freight, and who carries the risk in transit?

Get the answers in writing before the truck leaves. When the settlement comes back, check it line by line.

How records for each unit help

An assay settlement covers the whole lot. Your own records help you make sense of it. If you know how many cats went in, what kind they were and which cars they came off, you can compare loads over time and spot one that came in low. The same records back up your packing list and bill of lading.

Our guide on what to record for every converter covers what to capture for each unit. For the physical side, read how to prep a load buyers can bid on.

Getting more than one offer

Terms matter most when you can compare buyers. SMASH is a marketplace, not a buyer. You list a load of cats, vetted businesses in Canada and the US make offers, and you pick one. The buyer pays you directly under the terms you agreed. Listing a sale at auction is free, and SMASH charges the seller a commission on completed auction sales. See how SMASH works for auto recyclers, or read why adding buyers does not mean dropping the ones you already trust.