The Recycling Entrepreneur

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 ISSN: 1539-6789    (C) Scott D. Andrews July/August, 2002

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In This Month's Issue...

1. Announcements & Commentary

2. What is "Recycling"?

3. How To Find a Good Refiner

4. Trivia - How much Platinum is In a Catalytic Converter?

5. Coming next month - Book Review: Guerilla Capitalism, ISBN: 0-915179-16-4, by
                                       Adam Cash

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*** Section 1 ***

Welcome to the July/August issue of The Recycling Entrepreneur, the monthly newsletter devoted to those interested in the subject of recycling for profit.

If you've been following precious metals prices recently at http://www.kitco.com/ you're aware of just how stagnant the markets have become.

Does this discourage me? Not at all! As a matter of fact, I'd prefer relatively constant prices over wildly erratic ones. There is very little competition out there for precious metals scrap, at least on the level of the entrepreneur.

Yes, there are a lot of refiners looking desperately for scrap to feed their furnaces. But you need to realize that refiners are NOT marketers, nor are they entrepreneurs. They are dependent upon marketers and entrepreneurs, however.

Their biggest problem is that they don't like to admit that. Like every other businessperson, they want the large, constant contracts with major suppliers of scrap material.
I'll give you some pointers on how to find a decent refiner/processor for your scrap later in this newsletter.

My advice, as always, is to get started doing SOMETHING, and start doing it NOW. If you decide recycling is not for you, do something else. But develop a profitable sideline for
the financial safety and security of yourself and your loved ones.

I've been around just long enough to see that the ultimate security is in your personal knowledge and the ability to market, i.e., apply, that knowledge and skills to an income
generating endeavor. All the jobs we considered lifetime, secure, high-paying positions have proven not to be over time.

If you have questions or suggestions as to what you'd like to see covered , let me know and I'll do my best to address it. Remember, this ezine is designed to be support material for "The Recycler's Library". If you are not currently an owner of the manuals, you can invest in yourself and your future by starting your recycling business NOW.

*** Section 2 ***

How Do I Define Recycling?

In my +25 years of recycling experience I have had various people say to me that I am not "a recycler". I remember one person (who considered himself a "purist") tell me that what I "really" am is "a glorified garbageman".

My response? "Hey, I plead guilty!" I don't really care what label you wish to apply to me or the work I do.

And neither should you.

I define recycling as locating undervalued assets and capitalizing on their value. In some cases this might mean taking them out of the waste stream, thereby decreasing the amount of waste going into dumps and landfills and creating a positive environmental impact.

Mostly, however, I capitalize (by locating, buying or trading for other assets, and making a PROFIT) on items which aren't really considered waste by the owners.

I make these items more valuable by trading another asset for them, either cash or some other form of more liquid (as in sellable) precious metal asset. So I've turned an item with some intrinsic worth or value into one of more use to the owner. I'm happy, they're happy, and free enterprise thrives.

So feel free to call me a recycler, a "junker", scrapper, or a glorified garbageman - I don't care about the label. As long as both parties are happy at the end of the day with what they walk away with, I've fulfilled my goal. If I've contributed some small positive impact to the environment, so much the better.

I do consider there to be various ways to profit from what I call recycling, each with its strengths, weaknesses,  advantages, and disadvantages. These are my thoughts on the subject:

First and foremost, and the method I propound, is simply buying scrap material and selling it to a refiner, processor, or end user. Take your profits rapidly, and put them into buying more scrap.

The advantages are that you make your money rapidly so you see immediate results. This is extremely important in keeping your business going and growing. Risk is minimized as you're not tying up your capital, and very few special tools or equipment are required. This is also the least labor intensive (i.e., good income for little physical work) method.

Next is the business of buying scrap and upgrading it to a higher value by some form of processing. This is what scrap yards, refiners, and steel and metals manufacturers do.

Turning metals into a more pure state for sale to the ultimate end users (manufacturers), the value of scrap is usually increased substantially. However, the labor and capital investment required in machinery and plant and equipment soaks up most of the increased return.

This is generally a long-term, high-volume process with high expenses and long turn-around time - not what the high-profit recycler wants! This is not to say that there are not exceptions to the rule.

For example, it is possible to buy or even build a one or two-person smelting facility. Say you have a good source of aluminum scrap such as transmission cases or large quantities of scrap aluminum cans. You can potentially double your investment in the scrap -IF you're able to process enough volume to turn it into 500 pound sows for sale to a major aluminum smelter.

Or perhaps you have dental labs or manufacturing jewelers which will will pay a premium for gold or platinum alloys. You might have a potentially lucrative outlet for minimally processed scrap locally. You also have a myriad of other hats to wear besides that of
scrap buyer. Now you're a refiner/environmental compliance specialist/manufacturer/marketer/ and legal compliance specialist (or form filler for the
government agencies who will track everything you do).

Taking this a step further, you could become a manufacturer of new products using scrap
you've purchased. Things can get really interesting here from a profit standpoint.
Want to take $15 worth of dental gold and make it into $150? Simply become a manufacturing, or custom jeweler. Want to make 35 cent a pound scrap aluminum into products worth $30.00 per pound? Learn to smelt and cast your scrap into items such as custom lettering for architectural signs or products such as deck cleats.

Don't kid yourself, there are people who do this daily, and you can't beat the profit margins. Taking old jewelry or gold teeth and melting, then lost-wax casting them is not really very difficult. Likewise with sand-casting aluminum and other non-ferrous metals.

Drawbacks? Other than the aforementioned government oversights, the equipment costs can be very modest, and the skills can be easily learned. So there are not really any big negatives here. The biggest challenge is probably in marketing your service and product to the retail buyer. You don't want to become a wholesale manufacturer, you want that retail markup for yourself.

Want to get richer than Bill Gates? Devise a method for profitably recycling scrap tires. Or, if you just want to take some raw materials which are badly in need of recycling ( you might even be paid to take them off the owners' hands!), and turn them into as much as
$400 a day in profit, go here: http://www.wgsc.com/homebase/122wsltr.htm

If you can identify a niche in your area (a market hungry for your product) the sky can be the limit. The disadvantages are that you are going to become tied to the manufacturing
process and a slave to the demand for your product.

The recycling aspect really becomes less relevant as you become more successful in this type of an endeavor. It contributes to your profit margin due to decreased raw material costs, but the increased time spent buying your scrap feed takes away from your more profitable activities, or manufacturing of the product.

Bottom line, you need to decide what appeals most to you and develop the knowledge and skills to profit from whichever type of "recycling" you decide to do. I'll be sharing some information on the types of recycling I DON'T engage in.

There is good money to be made in all three, so I'll do my best to make available to you others' information I've collected in my recycling career. So stay tuned....

*** Section 3 ***

How to Find a Good Refiner = I am frequently asked how one can locate a good, i.e. trustworthy, refiner.

My answer, in theory, is simple: the same way you'd find a good doctor, dentist, attorney, or plumber. First and foremost, word-of-mouth. Ask local businesses who might make use of a refiner/processor who they recommend.

Examples might be dental labs, manufacturing jewelers, coin and pawn shops, etc.. If you
are located in a major urban center, especially on either coast of the US, you're probably going be able to find someone within your geographic area who can meet your needs.

My secret weapon, as always, is first to do some serious searching on the 'Net.
www.ThomasRegister.com is where you want to go FIRST. Register with them, FREE,
and find a list of companies specializing in the type of scrap you want to have refined.
Call, e-mail, fax, or visit their website. Realize that the larger they are in business volume (these stats are noted in ThomasRegister) the less likely they are to be interested in you as a small-volume customer.

Find out exactly what you need to know to evaluate their services with your needs:
refining schedules (what percentage of the value of your scrap they'll charge), settlement
times (how long it will take them to refine a lot of your scrap, from receipt to when they cut you a check or return your metals to you), form of payment (bank draft, pure bullion metal, wire transfer, etc.), minimum lot fees and assorted miscellaneous charges.

Ask about their policies on witnessing the refining processes (either by you or a hired,
expert representative). Only the largest refiners will usually be open to this, which means
you'd need to be refining a large, very valuable lot of scrap to justify the expense and time.
My final suggestion: prepare to be disappointed in whatever return you get from your scrap.

This is especially true with electronics scrap. Unless you know exactly what your scrap
contains ( and the ONLY way to know that is if it is already in an assayable alloy form), you are likely going to feel that you've been ripped off. Expect this and be able to deal with it- you're not going to prevail in a fight with a refiner over what your scrap's value is.

It is for this reason that my recycling philosophy excludes the use of refiners. I believe that by buying scrap at a price which allows you to sell it quickly and without processing, you're going to be much more successful in your efforts. Buying scrap without knowing
accurately what it contains is a recipe for disappointment.

Unless you're interested in accumulating bullion precious metals for your own investment purposes or for trading, do this business the simple and profitable way, and avoid having scrap refined.

*** Section 4 ***

Trivia Question - How Much Platinum is There in a Catalytic Converter?

Answer: If you've read my manual on recycling
catalytic converters, you're probably keenly aware of the statement I made about there being roughly one pennyweight (1/20th of a troy ounce) of TOTAL precious metals in a converter.

This was based on research done the Bureau of Mines back in the early 80's on refining and recovery of PGM's from virgin auto catalyst. Back in the early days of converter production, this was a pretty good estimation and was what the large refiners/buyers would base their per pound scrap catalyst prices on.

In the ensuing years the demands placed on the converter to be more efficient and reduce various emissions has resulted in much different precious metal contents. These days there isn't an average which I could report to you.

he reason for this is that no one that knows is willing to reveal it. Since there is no longer a Bureau of Mines reporting the latest research into these types of subjects, only the big refiners are privy to this information, and they consider it proprietary for their own marketing purposes.

From the recycler's standpoint, this is largely irrelevant. The only thing we are concerned with is what we will get for our scrap from the end buyer/processor. You can drive yourself crazy trying to determine how they set prices and what their profit margins are, but you
won't accomplish anything.

Unless you have the financial wherewithal to gather, open, and accurately assay all the catalyst from thousands of converters you'll never find an answer to this question.

Current design and manufacturing practices in the auto industry require that the convertor essentially designed for the type of vehicle it is installed on. There are dozens of different requirements according to the vehicle size, displacement, power level, which country it will be sold in, and etc.

The same vehicle sold in the US may have an entirely different converter (with completely different platinum:palladium:rhodium ratios) than its brother sold in Europe.

It is for this reason that it is currently more profitable, if you're seriously recycling converters, for you to accumulate the converters and sell them to the processor by type
rather than opening them and selling the catalyst by the pound.

I will go into this at length in the coming updates to "The Recycler's Library". One thing that has not changed is that you DO NOT want to get involved in refining this material yourself.

Next month's question: How long have precious metals been used in dentistry?

*** Section 5 ***

Coming next month: A new book review; some little-known opportunities outside the precious metals, when will silver take off???