Your trusted source for the latest news and insights on Markets, Economy, Companies, Money, and Personal Finance.

USA Finance Digest is your one-stop destination for the latest financial news and insights

Your trusted source for the latest news and insights on Markets, Economy, Companies, Money, and Personal Finance.

Find Out Where Your Stolen Catalytic Converter Ended Up

One morning in September, a truck disgorged its load of pulverized rock with a resounding bang inside Stillwater Mining’s metallurgical plant north of Yellowstone National Park.

The mined ore contains platinum, palladium and rhodium, three of the earth’s rarest, most expensive metals — and vital components in the millions of catalytic converters that reduce polluting emissions from gasoline-powered vehicles.

At the opposite end of the plant was another batch of metal, not from the mine but from used catalytic converters ground into powder for recycling. The new and the old metals would later be blended under intense heat, then shipped to a refinery.

Recycling catalytic converters costs less than mining the ore. But it carries a risk, as Stillwater discovered after paying more than $170 million for used ones, many of them stolen, according to an indictment handed up this spring on Long Island that implicated the mine. Stillwater was not charged and denied knowing the devices were stolen.

The indictment is an outgrowth of a billion-dollar epidemic of catalytic converter thefts that has not only disabled vehicles but also involved dozens of shootings, truck hijackings and other violence. Replacement devices are often hard to get and can cost $1,000 or more.

Despite public attention on the thefts, little has been known about where the stolen metal goes, who benefits or why stopping the thievery has proved so difficult.

An examination of business records and social media posts, as well as interviews with more than 80 officials on three continents who have ties to the industry, showed that the stolen devices pass through middlemen, smelters and refineries in the United States and overseas. Along the way, their provenance becomes opaque, leaving beneficiaries of the thefts with plausible deniability and little incentive to stop them.

During processing, the metal is blended with legitimate supplies from mines and scrapyards, The New York Times found, before being sold primarily to companies that make catalytic converters for automakers, as well as pharmaceutical companies for cancer and other drugs, military contractors for weapons production, and banks for their precious-metals trading desks, among others.

By then, it is nearly impossible to separate what’s legal from what’s not.

Banks provide short-term financing to process the metals, while other lightly regulated lenders, sometimes called “shadow bankers,” step in when the big banks won’t, Mark Williams, a former Federal Reserve Bank examiner, said in an interview.

Quantifying the thefts is difficult, and estimates vary widely. About 6 percent of the 12 million catalytic converters recycled each year are believed to have been stolen, with the rest coming from scrapyards and other legitimate sources, according to Howard Nusbaum, administrator of the National Salvage Vehicle Reporting Program, a nonprofit group that works closely with law enforcement.

That low percentage is little comfort to the owners of the roughly 600,000 cars whose devices, sometimes known as cats or autocats, were swiped last year. The commercial appetite for the three metals, called platinum group metals or PGMs, has been insatiable.

In an indictment last year involving an auto shop in New Jersey, the shop was accused of selling stolen converters to an unnamed, unindicted co-conspirator, which people with knowledge of the indictment identified as Dowa Metals and Mining America, a Japanese-owned smelter that calls itself “a gateway into the world of PGM metal recycling for North and South America.”

A Dowa spokesman said in a statement that the company “has done nothing wrong and that any allegation to the contrary is false.”

A cottage industry of enablers has grown up around the market. To help thieves assess where and when to strike, the New Jersey auto shop sold access to apps that transmitted up-to-the-minute prices of the metals along with the estimated value of catalytic converters from different vehicles.

“That made it easier for thieves who otherwise would just be slinging dope on a corner to just pull out their phone and be like, ‘Oh, look, there’s a Prius parked across the street — I wonder how much I can get for that?’” said the lead federal prosecutor on a recent indictment.

The thieves have cast a wide net. A Bimbo Bakery delivery truck was hit in New Castle, Del., as were a Mr. Ding-A-Ling Ice Cream truck in Latham, N.Y., and 36 school buses over a single weekend in one Connecticut community. Amy Foote, an opera singer in the San Francisco Bay Area, said 11 of the devices had been stolen from her Toyota Prius. She called the car “a vending machine for catalytic converters.”

Authorities have dismantled several nationwide criminal rings trafficking in the devices and many states have introduced new laws. But the thefts continue, even as prices for the metal have dipped.

The subject arose repeatedly at a recent conference of the International Precious Metals Institute in Orlando. Lee Hockey, a consultant formerly with Johnson Matthey, a specialty chemical company, addressed culpability head on.

“Most people in this room will see petty thefts and say, ‘Oh, we’re not involved in that,’” Mr. Hockey said. “But everybody is. If you’re a refiner, even if you are dealing with a smelter, you are getting the metal, so you are liable. If you are an insurance company and you are insuring people on the site, you are liable. If you are doing an analysis of the sample, you are liable.” He added, “You are along the supply chain, and you are involved.”

Greg Roset, a former manager of Stillwater’s recycling program in Montana, answered unequivocally when asked in an interview if he ever worried about stolen metal entering the supply.

“Yes,” he said, “always.”

The frenzy over grimy metal casings underneath cars traces back to a barren strip of rocky land in South Africa’s so-called Platinum Belt.

For more than 100 years, gold reigned supreme in that country but by 2005, a confluence of events, set off partly by the auto industry, had deposed gold in favor of PGMs.

In the 1960s, as concern in the United States mounted over worsening air quality, environmentalists pointed to millions of cars belching toxic fumes from their tailpipes. Smog blanketed many major American cities.

In response, Congress passed the Clean Air Act of 1970, which included a provision requiring all vehicles manufactured after 1975 to sharply reduce pollutants. Automakers objected, saying it was not technologically possible.

But researchers at Engelhard Corporation, a metals processing company in New Jersey, found that platinum group metals could catalyze, or convert, unburned hydrocarbons, carbon monoxide and nitrogen oxides into less harmful forms. To be effective, the catalysts had to be durable, have a high melting point and resist corrosion.

Engelhard coated a ceramic honeycomb screen with a thin layer of PGMs and placed it inside a metal container through which the engine exhaust passed.

“It stands as one of the greatest technological interventions to protect the environment in history,” said Ken Cook, president of the Environmental Working Group, an advocacy organization.

As an added benefit, the precious metals are recyclable. A single converter contains only a small amount, but with millions of cars on the road, all that rare metal being recycled only from scrapyards struck some people as a lost opportunity.

And so, a thriving underground network of thieves took root.

On a cold day in March 2022, DG Auto issued an urgent phone alert: “Palladium breaks $2,900, reaching its highest price since June 2021.” Noting that prices on average had risen 15 percent the week before, the company suggested downloading its app “to make sure you’re getting the best price for your converter.”

DG Auto also showed an interest in international affairs. “Metal prices are moving as China’s lockdowns ease up,” the company texted customers. “Shanghai is slowly reopening and Beijing lockdown is not likely.”

In an industrial park in Freehold, N.J., less than a half-mile from a state vehicle inspection station, DG Auto became one of the nation’s biggest buyers and sellers of stolen catalytic converters, according to the authorities.

Customers who paid $29 a month for its “platinum package” could submit pictures of the devices for estimates, along with other services.

In the indictment last year, a federal grand jury accused DG Auto of selling stolen converters to the unindicted co-conspirator, identified to The Times as Dowa Metals and Mining America.

“Our strength is in our ability to collect spent catalysts by ourselves, which enables us to obtain market information with relative ease,” Akira Sekiguchi, Dowa’s president, told investors last year.

At the time, Dowa was part owner of a metal-testing company, Nippon PGM America, along with Tanaka and Toyota Tsusho America, a unit of Toyota Motors, according to Nippon’s website. Neither Tanaka nor Toyota were mentioned in the indictment or accused of wrongdoing. In a statement, Tanaka said there was “no direct contractual relationship” between it and Dowa.

Last month, three people pleaded guilty to their role in the nationwide conspiracy to ship $600 million of stolen catalytic converters from California to DG Auto. Five co-defendants have pleaded not guilty.

Best practices for the industry emphasize buying autocats from known, reputable suppliers that can trace the devices’ origins. Even so, stolen converters enter the supply chain.

Experienced auto theft investigators prefer to focus on companies buying the metals. Joseph Boche, a former director of the International Association of Auto Theft Investigators, said the thefts would mostly stop if basic rules were followed nationally: identify the person selling the device and the vehicle from which it was removed, require traceable payment, prohibit cash transactions, and maintain sales records.

But support has been uneven, he said. In the spring of 2021, a group of smelters and refiners contacted him to combat the thefts. “But they didn’t like any of my suggestions,” he said, “and stopped inviting me to any of their meetings.”

Montana is one of the few places in the world where the metals used in catalytic converters are mined. Extracting the deposits is costly, requiring twin tunnels dug 3.5 miles underground.

To augment its supply, Stillwater began buying catalytic converters for recycling, a cheaper method and less harmful to the environment.

“Blending materials from two different sources gives us a competitive advantage over other recycling facilities,” the company website states. “Our Montana mines contain quantities of nickel and copper which facilitate extraction of the PGMs from the recycled material.”

Over the past decade, the Stillwater plant processed more PGMs from the used devices than from its Montana mines, Heather McDowell, a company official, said during a recent tour. To keep the pipeline of recycled devices flowing, she said, Stillwater relies on 28 suppliers.

All of the PGMs are sent for final refining to Johnson Matthey for use in, among other things, “the vital compounds — known as active pharmaceutical ingredients,” it said in its 2021 annual report.

Pfizer, for example, uses platinum for chemotherapy treatments. “Pfizer has a diverse supply chain network and has not relied on a sole supplier,” the company said in an email response to questions about Stillwater. The company declined to say whether Stillwater is one of those suppliers.

When Stillwater needed to prime the pump, it advanced cash to “third-party brokers and suppliers to support the purchase and collection of spent autocatalytic materials,” the company wrote in a regulatory filing.

In the past, those payments totaled in the tens of millions of dollars, court records show.

For other companies, lenders step in with short-term financing, according to industry documents and interviews with five precious-metals experts. Some loans are used to buy catalytic converters to “keep the wheels spinning” on the recycling business, one precious-metals executive said.

JP Morgan, Morgan Stanley and Goldman Sachs provide short-term financing for metal processors, according to Ruth Crowell, chief executive of the London Bullion Market Association, a trade group that sets standards for the precious-metals industry. JP Morgan and Goldman Sachs did not respond to requests for comment; a spokesman for Morgan Stanley declined to discuss lending practices.

Share this article
Shareable URL
Prev Post

Urge China to Halt Fentanyl Trafficking to the U.S.

Next Post

Exploring the High Price Tag of a NYC Lobster Roll and Fries

Leave a Reply

Your email address will not be published. Required fields are marked *

Read next
When The New York Submit first reported in 2020 a few laptop computer as soon as utilized by Hunter Biden —…
James Wooden’s mom struggled with dependancy, and he typically discovered himself adrift, not realizing what day…
For greater than half a century, the handbook for the way growing international locations can develop wealthy…