Leading the precious metal business

What would you say are the main advantages of Tanaka Precious Metals’ business model?

One special aspect that makes our company unique is our cycle process – from procurement, processing and selling to refining.

In the 1890s, Tanaka developed the technology for taking platinum out of light bulbs. Gold is malleable, so it’s not hard to reclaim or recycle it. Other precious metals, however, are hard to extract; we developed the technology and exhibited products from that process at the Tokyo World Fair.

In order to get platinum, we started importing it from the Soviet Union. During the 1950s, in the period of rapid growth, telephone systems were being developed alongside exchanging systems, and in conjunction with the then NTT we developed the materials for telephone lines.

Semiconductors are another area where we provide materials. Moreover, we supply companies in the electronics parts industry. With regards to recycling and refining processes, we recycle precious metal from all kinds of parts ranging from cars to IC chips.  

Tanaka also provides raw materials to manufacturers and collects the scraps from the manufacturing process for recycling and reselling. A recycling company and processing/manufacturing company each handles only recycling or processing/manufacturing. They offer precious metals through trading in the market or after making them in a physically available form. Cost for transactions in the market (the difference between selling and buying prices: spread) is required in the former case, and lead time for transactions occurs in the latter case.

Tanaka reduces customers’ lead time and bullion procurement costs by comprehensively covering the process from bullion procurement, processing, manufacturing, and selling to recycling without trading in the market. Because of our experience in this industry, we have connections we can use and we need no help in terms of procurement of precious metals. Because we deal with expensive precious metals, we also provide leasing services for companies with limited funds.

What would you identify as the main market trends in precious metals’ recycling and refining today?

In terms of precious metals collection and reuse, competition at a global level is intensifying. The greatest demand for platinum as an industrial material is for automobiles catalysts. We started our operations in that area in 2000. There are American, European and also some Asian companies that have become involved in this business. Recently, a British company has been expanding in the US by doing this type of reclaiming. A South African company has joined the market as well.

Factors that guarantee competitive advantage are: the frequency of collection, the cost of collection and the lead time, namely the time taken until the scrap is recycled. Things that have made the market become increasingly competitive are the reduction of the cost or lead time, and the increasing amount of metal extracted, reclaimed and recycled.

For example, for what we call minor precious metal such as iridium, the cost of reclaiming is very high, so that makes it difficult to be competitive. With this increase in competition, there is a lot of loss of clients. Additionally, when comparing with South Africa in terms of refining, that’s where we lose and it’s very difficult to compete with them. South Africa has traditionally done gold mining and what they found is that secondary scrap is more precious and valuable, so they have been shifting their efforts accordingly.

With a stronger global competition and declining price of platinum, what is Tanaka’s strategy to consolidate and strengthen its market position?

Even with the price of platinum coming down, our main business is to make materials using platinum to supply other companies. Therefore, the declining cost of platinum does not affect much our production process. What we are trying to do to compete globally is refining. Our plan is to develop a network. We acquired Metalor Technologies International SA, a Swiss company that has the same business as Tanaka but different product segments. With this move we intend to expand further globally. Not only we are using M&As, but also joint ventures.

We are collaborating with Dowa Holdings, a Japanese company, to recycle materials from car catalysts. We have achieved greater efficiency in the smelting process by increasing the concentration by 50%. Once we obtained the more concentrated material, we take it to the refineries and put it through another process to recycle the precious metal. Through this cooperation we reduced the cost in getting materials necessary for refining.

Automation is the third measure we are focusing on in order to reduce cost and increase our competitiveness.

From the point of view of the recovery system of precious metals, what would you highlight as the segment or applications with the highest growth potential when it comes to the American market?

I can give you one example in the auto sector in America. We are reclaiming from automakers and also parts makers thereby putting a recycling process in place by cooperating with companies that collect the used parts and we have invested in companies that recycle these parts.

We collect the catalyst scrap from fuel batteries, so, as a first step, we start selling the materials. We are thinking about getting into the recycling part when collecting parts since the batteries can be used in forklifts and other products.

That’s what we are planning next, a full cycle from selling to recycling. The reason why we opted for this strategy is that we are going to see an increase in the demand for the fuel batteries and materials by 2020, and the market should be stable by 2040 and 2050, so we can be fully prepared for that stage.

Sustainability used to be a buzzword few years ago, but with the Paris COP21, new regulations have been put in place and major companies must comply with them. When it comes to fuel cell and PEFC that you are developing, what are the expectations for growth in the US market?

We expect to have about 10 million battery-powered automobiles by 2050 and 20% of them in America, so you can see that there is a big market opportunity.

Why we are investing heavily in fuel cells? Looking at global trends such as the future role of hydrogen, creating a 100% environmentally sustainable society is going to be the desired ideal state. For instance, Germany aims at having 80% of the energy to come from renewable sources by 2050. One of the problems with sustainable and renewable energy is that you cannot produce it when you want it; you have to collect it when it’s available and store it to ensure smooth consumption. The issue is that systems for storing electricity are still inefficient.

There are projects today to decompose the energy into hydrogen components so they can store that way. Battery-powered automobiles will use the hydrogen directly, so the energy will be efficiently used. Needless to say, it’s a very good solution for the environment with zero CO2 emissions.

If you look at California, regulations there are the strictest in the world, which creates a huge opportunity for hydrogen and that’s where we are looking at currently. Moreover, hydrogen cell batteries allow people to drive long distances and shorten the time for recharging, and that’s another reason why we are investing in this technology.

It is very easy to use a catalyst to extract hydrogen from natural gas, so with the development of shale gas, hydrogen becomes even more attractive. South Africa has 60% to 70% share of the world’s platinum, which is used for the catalysts of fuel batteries. What we are worried about is that even as the price continues to decrease on the market, the actual cost is increasing, because, first of all, labor costs increased. Second, in terms of safety the actual search process is very dangerous, so they have had to put in place stricter safety measures.

In African countries, there are still large areas where power transmission infrastructure is not sufficient and small generators are not efficient. For this reason, they are moving towards hydrogen cell and Tanaka is also involved in these projects. 

The former Mayor of Tokyo, Yoichi Masuzoe said: “The 1964 Tokyo Olympics left the shinkansen high-speed train system as its legacy. The upcoming Olympics will leave a hydrogen society as its legacy.” Since you are the Chairman of the Catalyst Manufacturers Association of Japan, can you tell us more about this vision of the government and how can Tanaka contribute to this goal?

We are working to achieve the hydrogen society with all relevant stakeholders. By 2020, we want to have 40,000 hydrogen fuel cell-powered vehicles including buses here in Tokyo. Of course, to realize this goal, hydrogen stations will be needed. The cost of these hydrogen stations is very expensive. It is estimated that each station could cost up to $5 million.

One kilogram of hydrogen costs around ¥1,100, and a car can travel 110km on it. The running costs are about the same, but the mileage is not as high as in hybrid cars. To supply hydrogen cheaply, there needs to be a supply chain in place. To do that we would have to be able to produce a large volume of hydrogen, and you can’t do that only with a single supplier.

We need to realize the full potential of hydrogen and develop the catalyst business further in its multiple applications. As mentioned before, catalysts are used in energy for example – as mentioned earlier in extracting hydrogen. Moreover, catalysts are used in fuel batteries and to break down the energy so it can be stored in hydrogen cells.

The necessary technology is evolving and the future of the market looks bright. As Chairman of the Catalyst Manufacturers Association, we are working closely together because the scale of this project and vision needs a comprehensive framework and engagement of all stakeholders.