Nick Snyder, Pete Thomas - VP of Zaner Precious Metals, and Scott Pollan - Scrap Division of Zaner Metals.

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Nick Snyder:
will be hearing this. So kind of what your projections for next week, and then we can kind of get into the hydrogen stuff.

Pete Thomas:
Sure.

Scott Pollan:
Pete, do you want to do prices?

Pete Thomas:
Yeah, I think there's two things as we're discussing PGMs platinum palladium as our primary thrust and of course, copper as our secondary, which is just as vital to our good guys over there at recycle that maybe we'll touch on that, because that's been interesting too. But for the moment we have seen a tremendous amount of pressure from 2,400 all the way down to 2,140 in palladium.

Nick Snyder:
Yeah.

Pete Thomas:
It has been just vicious. Guys that aren't hedging with us have really suffered some pretty big hits on inventory prices and platinum, they're starting to sniff 950, which is startling. You know?

Nick Snyder:
Which it was over a thousand for a while.

Pete Thomas:
Yep, absolutely right. Yeah. So Nick, I had a pretty lengthy talk with Matt Watson from Precious Metals Commodity Management, their consumers like you are. He's a metallurgist and we kind of went over it. He said that in his opinion, with the weakness he's seeing coming out of China and you and I have discussed this on your show a couple of times and I continue to hold this posture. Things aren't as good or as rosy as China's attempting to project itself. It looks to me like they're net consumption along with no chips, we're seeing a tremendous draw down on the primary purchases of platinum and palladium, both.

Nick Snyder:
Gotcha, and there's no light at the end of the tunnel for the chips yet? We're not seeing that?

Pete Thomas:
Well, I mean, pragmatically, what it takes... it is not an easy thing to do. It is a very high-tech industry. We're talking about sanitary rooms, special type of welding, high-end flux. There's just a lot of things involved in it and a lot of computer and computer programming and robots that have to be built.

Pete Thomas:
So it isn't like, "Hey, you guys come on over to this factory B, we're going to switch over from A to B." We've got to build robots and program them and buy the stuff. So it's a ways out, it's a ways out. I think that- [crosstalk 00:03:17].

Scott Pollan:
Let's... Sorry.

Pete Thomas:
Everybody is going to suffer from it. You know?

Scott Pollan:
We have to remember, there's also a category five typhoon over there right now. So just like New Orleans was just slammed.

Pete Thomas:
Oh, that's a good point.

Scott Pollan:
They're getting the same storms, if not bigger.

Pete Thomas:
Yeah.

Nick Snyder:
Gotcha. Well, do you guys want to dive into the hydrogen, how that's going to affect the market exactly? I'm still kind of trying to wrap my head around it, to be honest with you.

Pete Thomas:
I mean, think about it. I'll tell you what, let's make this easy for everybody. Let's try to clear this up. All right, we're going to take, for example, Scott, we were talking about methadone being forced over a membrane. What happens is you have a membrane that's impregnated with a metal, which is very similar to auto cats, right?

Nick Snyder:
Yep.

Pete Thomas:
We have a platinum or palladium depending on the engine fuel source. It knocks down the NO2 that comes out of the tailpipe and carbon dioxide as well. What happens is you force these end and products, let's say methanol, over a membrane that's impregnated with platinum and what happens is we split hydrogen and oxygen. What happens is we get a non-polluting source, which is what everybody's... that's the holy grail right now.

Pete Thomas:
So what's happening is this is going to change the face of recycling the way you and I have grown up in this industry in tremendous, tremendous fashion. The primary one is that we're going from anywhere from recovery of one to three grams of end product, of NPGM to 50 grams that are on each membrane.

Pete Thomas:
So the recycling industry is going to have a renaissance, because we're going to see a tremendous amount of product being able to be captured and recycled. It's all going to depend on what the net price of platinum palladium is and my projection for that, after having talked to Dr. Davis, who's the head of south African mining out there and a number of other people, they're producing less and it's costing them more to make it and now we're going to be going into a cycle where we're having higher demand for these products. I think our industry, we've got to enjoy these brand new types of energy that we're going to be using.

Nick Snyder:
So you're saying basically these cars that are using hydrogen energy, they're going to need 50 grams or so of PGMs in them versus whatever they are now. What is it, three to five or something like that?

Pete Thomas:
Five let's say, the spread, I like that, yeah.

Nick Snyder:
Three to five on a typical vehicle right now.

Pete Thomas:
Your new service, which I think is fantastic, the shipping, is that about your average? I think your numbers would be very strong.

Nick Snyder:
On how per cat?

Pete Thomas:
Yeah.

Nick Snyder:
Yeah. I think it's in that three to five range.

Pete Thomas:
Okay. So there we go. That'll be our base number. Scott, what would you like to add?

Scott Pollan:
Well, I have been doing a little bit of reading, so yes, it's nice to... oh yeah, I love when I read.

Pete Thomas:
He went to college everybody, look out.

Scott Pollan:
Uh oh. I put in my two hours every morning, two hours a night. So hydrogen is pretty fascinating. There's been lots of talk about, one, how it's going to be generated and, two, how it's going to be transmitted from generation site to use station.

Pete Thomas:
Yeah, that's a big issue.

Scott Pollan:
The S and P just did a great article about the colors of hydrogen, gray hydrogen- [crosstalk 00:07:08]

Pete Thomas:
They went through that?

Scott Pollan:
Yep. Yep. So gray hydrogen would be produced by the burning of natural gas. Then hydrogen is transmitted through natural gas pipelines. Brown hydrogen would be burned coal to produce hydrogen and send that through natural gas pipelines. Blue hydrogen would be natural gas and then burning natural gas, producing hydrogen, sending that through the pipeline, but then capturing the CO2 and storing that in underground reservoirs and green hydrogen would be using clean green electricity, solar, wind, wave, to bring water in and to produce hydrogen out, still trying to capture some of the CO2 that's created in that process.

Pete Thomas:
But let's not confuse our viewers, because this gets really complicated. When you talk about the variance of this gas, not only that, the size of the molecules are larger and smaller and you get seepage from different types and grades of pipe. So what we want to do is keep this as simple as we can and say, here we go, we've got multiple grades that we're going to be capturing. But the end thing to all of our people, Nick, is that we are going to be seeing a lot more capturing of platinum and palladium that is used on these membranes.

Nick Snyder:
Yeah.

Pete Thomas:
Through that separation.

Nick Snyder:
By far, I mean, if that thing becomes the norm, hydrogen powered vehicles.

Pete Thomas:
Yep.

Nick Snyder:
It would be a huge game changer and everyone's going to need the PGM. So you would think, which this simple, traditional economics there's supply and demand, it's going to push the price up. It's going to push it up crazy.

Pete Thomas:
You didn't even have to go to college for that push it up crazy phase, either.

Scott Pollan:
Let's not forget you guys, the infrastructure for a hydrogen America is already built. We do not need to build anything extra to store, to transport and to distribute, because we already have two million miles of natural gas pipeline under the surface. That cubic volume of natural gas pipeline can carry 6% to 16% hydrogen fuel. So we're already cutting the natural gas with hydrogen at fuel generation stations, electricity generation stations.

Pete Thomas:
The only caveat to that Scott, would be that we might have to sleeve some of that with a higher density type of pipe. That of course will be a plastic pipe, because we don't want any seepage of that product.

Nick Snyder:
Okay.

Pete Thomas:
So that means we're going to be using more petroleum, which is an evil word, but once we get those sleeves poured and tapped, I think then at that point, you're a hundred percent right. I mean, we aren't out there with hoes and digging up the ground. All that's already been done. And a lot of you guys know these gigantic white, circular, domes that hold your propane, your methane, things of that nature. Those can all hold hydrogen.

Nick Snyder:
Okay, I was not aware. [crosstalk 00:10:19]

Pete Thomas:
So the shift over-

Nick Snyder:
That's cool.

Pete Thomas:
It's real cool. Here's another thing I want you guys to know, you and I have talked on your show about EV cars and Scott and I have discussed this on a number of shows as well. You have about you guys crush cars, you've been doing it a long time. You'll see anywhere from 15 to 30 pounds of copper coming out of a car, depending on the vehicle, right? Electric vehicles have 110 pounds of copper.

Nick Snyder:
That's right. I knew there's a lot more in it.

Pete Thomas:
Yeah.

Nick Snyder:
So that's a whole other part of it, you know?

Pete Thomas:
That's a whole new animal for everybody.

Nick Snyder:
Yeah.

Pete Thomas:
I mean, we're talking about... and the other thing is too, now today we had a monster rally in copper. All of a sudden everybody realized that it was way too cheap and they went, "I think we want to buy some of this stuff." Everybody else is short around $4. We're looking at 4.50 or close to it and going, "Oh, am I in trouble." You guys, we've talked on your show, we don't want to be sellers of copper unless it gets near five bucks at which point, it's an advantageous edge if you have product on, but in the meantime, you're going to have wild swings and try to sell on the basis of your profitability, not on the price.

Nick Snyder:
That's how we do it.

Pete Thomas:
I know that's how you guys do it and you've been successful for years. You know?

Nick Snyder:
That's how, I mean, that's how we do it with the cats too, for the most part.

Pete Thomas:
Sure.

Nick Snyder:
A little more, a little waiting game sometimes, but I think it's good to hear. I'm confident in the market. We'll see, I think we're in store for a strong third quarter and fourth quarter.

Pete Thomas:
Well, it's fingers crossed. We need to get these chips made so that we can get new vehicles on the road so people can start trading in the old ones and really give a shot in the arm to our industry.

Nick Snyder:
Yeah, right there is going to be nice, whenever it happens.

Pete Thomas:
Yeah, that'd be a big push. I mean, I talked to someone who's on their third month of waiting for a vehicle they ordered. So that's not helping and she has a car to trade in that she's waiting to get rid of. So I think you're a hundred percent right. I think if the third quarter comes in strong and all of a sudden we're seeing chips getting released and we're seeing some upgrades in the existing market, that would be phenomenal.

Nick Snyder:
Absolutely. All right. Anything else to add, gentlemen?

Pete Thomas:
Scott, anything?

Scott Pollan:
Get used to these 20 cent price swings. This is now normal.

Pete Thomas:
You know what? I concur on that. I do not see... This is not like the old days guys. This is now where you load your rig and copper's at 4.13 And when you get to offload, it's at 4.50 or 4.40, and it's like, you had a great day. But it could go the other way, too. Like you're saying, you're going to have to take the good with the bad, or you're going to have to end up holding product, or you're going to have to hedge when you load the truck.

Nick Snyder:
Yeah.

Pete Thomas:
If you've got a four or five, six hour delivery time, you might want to just sell the load right When it's loaded. You know?

Nick Snyder:
All right. Real quick, the New Years, whereas platinum, palladium, rhodium going to be?

Scott Pollan:
That's a good question. [crosstalk 00:14:02]

Nick Snyder:
Scott, you go first.

Scott Pollan:
Yeah. I mean, are you buying any new cars right now? Are you going down to the lot to pick up a new pickup truck? Because I'm sure not, I'm waiting for a little bit. Really until we all decide that our old junky cars have to go and we want to go pick up a new sweet ride, we're going to see those prices low also. And winter's hard on cars. Winter's really hard on cars.

Nick Snyder:
Oh, you think it's going to stay around where it is or lower than today?

Scott Pollan:
We will reach a point where the used cars just can't stay on the road anymore and people are going to have to buy new cars. Now, is that this upcoming spring? Yeah, probably.

Nick Snyder:
Gotcha.

Pete Thomas:
You know what? I think we're going to have to see if the infrastructure bill, when it gets passed, if any of the money from the infrastructure actually gets to the infrastructure. They're already writing in a little caveats that it can be used for this, that, and the other thing. But if we see it come in and get injected in, then guys that are driving older rigs that are going to be getting hired because of the injection of $1.3 trillion into the infrastructure for building bridges and whatnot, all of them are going to need a new truck. It isn't a matter of if, it's sure. And we're just going to see a surge. I mean, we could see palladium test 2,500 again, no problem before the end of the year.

Scott Pollan:
Yeah.

Pete Thomas:
I think platinum at 11 or 1200 without a problem, but it depends on-

Nick Snyder:
If Rhodium gets back to 19?

Pete Thomas:
To who does?

Nick Snyder:
You think Rhodium gets back up to 19 in that area?

Pete Thomas:
Oh yeah. I don't think there's a question on that too. And copper at test five bucks.

Scott Pollan:
Yeah. There's a lot of metal in a Mac truck.

Pete Thomas:
Yeah.

Scott Pollan:
So when Mac trucks start rolling off the lines and Peterbilt's order books are full that's what you want to watch for.

Nick Snyder:
Okay. We'll keep watching and we'll keep trying to do this at least once every other week, maybe once every week, but we'll keep rolling, keep feeding everybody as much information as we can.

Pete Thomas:
Absolutely.

Nick Snyder:
All right guys, well, everyone have a great weekend. We'll get this posted next week for all our viewers and-

Pete Thomas:
Perfect.

Nick Snyder:
Enjoy.

Pete Thomas:
Everybody have a good weekend, and we're going to try to get you and help Nick, and it's important that an educated end user can protect himself and his company. So we're going to try and get you as much information as we can.

Nick Snyder:
Absolutely. All right, thanks guys. Thanks Pete, thanks Scott. Bye, bye.

Scott Pollan:
Thanks Nick.