What we are told by our suppliers: There’s a guy, we’ll call “Mr. Big Spender”, who recently has been paying above market rates to certain sellers for their catalytic converters. Based on what we’ve been told, Mr. Big Spender or Mr. B.S. for short, is buying cats at a loss.
Why is Mr. B.S. doing this: We don’t know what his motives are, neither will we speculate. But what we do know is that we both have seen this script played out before our eyes, over and over again. You know, the script where they overpay you in the beginning to gain your trust, only to pull the rug out from underneath you and later pay below market prices.
It’s a really simple formula that only benefits them in the long run.
The problem is: This type of practice creates distrust between ethical buyers and sellers. Because the sellers think “If Mr. B.S. can pay xyz amount per cat, then my current buyer can too. My buyer is making a whole bunch of money off of me.”
The truth is: The margins for end refiner’s are small…very small. A successful operation can consider themselves fortunate if they have a margin of about 3 to 5 percent. And out of that small margin they have to pay overhead like employee wages, insurance, building costs, utilities, decanning machines, and other equipment. Only after paying all expenses can they hope to make anything.
Our take: It’s not sustainable for any company to overpay for cats. If you find one that does, beware, you’re probably going to get screwed pretty soon…