* Low steel price set to cap rebound in auto recycling
* GRAPHIC: Global steel price: reut.rs/1nKIMaw
* GRAPHIC-2016 asset returns: reut.rs/1WAiOSC
By Jan Harvey
LONDON, March 9 (Reuters) - Recycling rates for autocatalyst metals platinum and palladium, have been driven lower in the past year not only by a price slide in the metals themselves, but also by a crash in the value of another raw material - steel.
With steel prices forecast to remain under heavy pressure this year in the face of over-supply and tepid demand, that could limit an expected rebound in the rate at which platinum group metals are recovered from catalysts.
Recycling slowed last year as more scrapped cars were stockpiled by recyclers awaiting better prices, and as fewer cars, which use platinum in their autocatalysts, were scrapped.
"The low steel price has stopped cars from entering the scrap profile in the first place, so there is a direct link between the low price and the amount of PGMs recycling," Johnson Matthey's general manager for market research Peter Duncan said.
Analysts predict a recovery in platinum recycling volumes this year after they fell as much as 20 percent in some areas in 2015, but that will be tempered by steel's decline.
A major driver of the drop was a 26 percent fall in platinum prices, partly in response to an uncertain global economic outlook and expectations of plentiful supplies.
But the overall rate at which cars were scrapped was also depressed by falling prices of steel ST-CRU-IDX, the primary recyclable material in cars, which slid by a third.
"At the end of the day, processors look at the total package of metal and what value they can derive from that," GFMS analyst Johann Wiebe said.
The World Platinum Investment Council estimated in a report last month that platinum recycling dropped 15 percent last year. In addition to losses in platinum prices, the lower steel price also negatively affected auto scrappage rates, it said.
A recovery in autocatalyst recycling this year, which usually accounts for around 15 percent of global platinum supply, is expected to help to offset a drop in output from platinum mines, according to the WPIC's research.
Processors can only hold on to material for so long before they are forced to get the recycling chain moving again, and this year's more than 10 percent rebound in platinum prices gives them an opportunity to do that.
"This year we're probably going to see some increase in the first quarter, given platinum is at $1,000. These guys can only hold off from the market for so long," a spokesman for one major U.S. recycler said. "I'd imagine they'll be taking advantage of these prices, and we should see a good bit of material coming out in the second quarter."
But continued weakness in steel, which remains under heavy pressure despite creeping off its lows, could limit the scope of that recovery.
"We would expect recycling to pick up a little bit this year, but that's very price dependent," Johnson Matthey's Duncan said. "Platinum group metals prices are more of a determinant of levels of PGM recycling than steel prices, but I do think it's relevant."
Reporting by Jan Harvey; Editing by Veronica Brown and Jane Merriman