Rubber recycling

4.2.1. Characteristics of the rubber recycling market

Shredded tyres, also called crumb rubber, have various applications in the rubber recycling sector. Figure 4.7 shows that in the US in 2001, of the total 0.45 million ton (996 million pounds) of crumb rubber produced, asphalt and moulded products were almost equal in market share, and combined had approximately 60% of the total market. The remaining 40% was used for the manufacturing of new products. Figure 4.7 shows that although consumption by all crumb rubber markets increased from 1997 to 2001, the crumb rubber market share of animal bedding, construction, plastic blends, and sport surfacing increased while the other crumb rubber markets shares decreased.

Figure 4.7. Crumb rubber markets: North America

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The aforementioned engineering studies provide limited support for further relative expansion of rubber recycling operations. Also, most governments are cautious in unambiguously promoting rubber recycling. For instance, the UK Government's Department of Trade and Industry reject the notion that recycling is underdeveloped due to the lack of capacity (DTI, 2003). DTI shows that there is capacity in place now capable of handling many more tyres than are being processed at present.

The main reason for the limited share of rubber recycling is the low profit margin in the crumb rubber sector. This is mainly caused by technical constraints and the low quality of the end product. Whether this situation will change depends on price developments of primary natural and synthetic rubber and on the options available to reduce the cost of recycling or expand the market for products made of secondary rubber further. In addition recycling costs are heavily penalised by high collection and transport costs which represent 40% to 60% of the total recycling costs, according to a French study on the costs of used tyres management (ADEME, 2001). Another reason for the limited market of rubber recycling is the restricted number of applications for secondary rubber.

World rubber prices are expected to fluctuate around the current level or drift lower in the short and medium-term. Low prices for primary rubber discourage the use of secondary rubber in various products. Further price improvements are unlikely because of the great potential for increased supply from more intensive tapping and from the increased production capacities in new producing countries (FAO, 2002). Given these exogenous developments in the primary market for rubber, the main issue with material recycling is whether or not the market for products of secondary rubber (i.e. rubber crumb) is "immature" and thus whether or not it should be supported to get over learning curves, etc.

Whether strong market distortions are present remains unclear. High price volatility is often recognised as a symptom of the presence of market distortions. There are some claims in the United States of high month-to-month price instability and shifting demand, especially for lower quality crumb rubber, but this only seems to apply to a limited number of markets within the rubber-recycling sector (Sunthonpagasit and Duffey, 2003a). In the following paragraphs, several other potential market failures will be discussed.

4.2.2. Information failure

Because of the large variety in crumb rubber size and quality, every rubber recycler in effect is said to produce a different product (Owen, 1998). Lack of uniform specifications in the crumb rubber market implies that suppliers have to submit their products for approval and testing in each new locality where they are proposed. The resulting high marketing costs seriously hamper the maturation of the crumb rubber market. The development of crumb rubber specifications could help to improve this situation. The American Society for Testing and Materials (ASTM) and the European Committee for Standardisation (CEN) have already developed standards for crumb rubber, so the problems relating to uncertainty about quality and other matters should be substantially reduced in the near future. Also for TDF, the ASTM has developed standard relating to the wire content, size, etc.

Another information failure is not directly related to used tyres, but to granulated rubber processing equipment. In the US, the reported maintenance costs of this equipment are reportedly 200% to 300% higher than the costs claimed by equipment manufacturers. One reason for this is the shorter than projected service lives of perishable items, such as shredder knives. Maintenance costs and the timing of maintenance seem to be important, since one processor claimed his shredder machine worked twice as fast with new knives. Such information failures make the planning of market entry and production volumes difficult. Sunthonpagasit and Duffey (2003b) consider this to be one of the reasons many companies fail within several years.

4.2.3. Technological externalities

Tyres are designed - for safety and durability reasons - to make them withstand the wear and tear of their everyday use as well as possible. Tyre strength originates from the added steel and fibre but mostly from the vulcanisation of its rubber. The steel and fibre increase recycling costs because they blunt the knives or wear down the hammers that cut or ground the tyres into smaller pieces. After cutting and grinding the steel and fibre have to be separated from the rubber, which also adds to the costs. Of course, we - as drivers -want tyres to be strong, we want them to be safe and we want to get a good mileage. These are the basic requirements a tyre has to live up to. Still, as noted above with reference to retreading, one could ask if the current balance between strength and recoverability is the right one if the incentives for one product attribute (i.e. recoverability) are missing (Amari et al., 1999).

A possible way to increase the likelihood of a correct or optimal balance would be to make the producers of tyres responsible for the cost of disposing or recycling them when they are worn down. This could be achieved through an Extended Producer Responsibility (EPR) approach, which will be discussed in the next section. Appropriately designed, such measures can transmit incentives from the post-consumption stage back up to purchasing decisions and thus manufacturing and design decisions.

Recycled rubber is not a perfect substitute for the virgin material due to vulcanisation, which is part of the production process. In this process rubber, carbon and sulphur are mixed together using heat and pressure to form a strong and durable material. This chemical process has proved hard to reverse and has been likened to "unbaking a cake and then reusing the eggs". Recycling of useful, uncontaminated materials is even more complex for multi-material laminated products such as modern tyres (Brown and Watson, 2000). There are currently many recycling techniques but these either produce an end-product which is inferior to virgin rubber, such as the size reduction techniques mentioned above, and can only be used for its original purpose in small percentages, or are at present economically unfeasible due to high energy costs (e.g. pyrolysis and gasification). New techniques, such as chemical and biological devulcanisation, mechanochemical recycling, and de-wiring technologies need to be developed further to produce a satisfactory product (Brown and Watson, 2000).

4.2.4. Policy failure

In the US, each state has its own laws and regulations with regard to waste management and recycling of tyres. Regulatory practices to stimulate recycling include landfill bans and disposal (tipping) fees. Ironically, however, many in the industry have perceived government grants and subsidies to some rubber recyclers as counterproductive. By granting some facilities access to exemptions from tipping fees and subsidies for capital or operating costs, they have put downward pressure on secondary rubber prices, scrap tyre availability, and tipping fees. This affects the survival of existing unsubsidised plants. Numerous subsidised rubber recycling facilities in the US closed down because they could not sustain profitability or they failed to find markets for processed material. For example, tyre-recycling programs in Oregon and Wisconsin provided end-users a subsidy of $20 per ton. The used tyres were collected and processed when the subsidy was in place, after which most of the new end users stopped processing.

Efforts to create a level playing field in the tyre-recycling sector have also been made at the Federal level in the US. Congress passed the Intermodal Surface Transportation Efficiency Act (ISTEA) in 1991, requiring the states to use scrap tyres for surfacing of federally funded highways. If this Act had been implemented, proponents claim it would have increased use by up to 70 million used tyres in 1997. However, in 1995 ISTEA was repealed, presumably as a consequence of lobbying efforts of the asphalt industry. As a result, the use of crumb-rubberised asphalt (CRA) now depends on the willingness of the state to initiate and sustain programmes. After the repeal of the ISTEA most processors who came into this business in anticipation of this potential market left due to downward pressure on secondary rubber prices (Sunthonpagasit and Duffey, 2003a).

  1. 3. Energy recovery
  2. 3.1. Characteristics of the energy recovery market

Financial-engineering studies are generally positive about the prospects of expanding the capacity of energy recovery. Still, as was shown in Figure 4 4 the relative importance of energy recovery has declined in the past five years. This trend can partly be explained by the increasing popularity and promotion of material recycling. Another important reason for the decline in energy recovery in a number of countries is the introduction of strict environmental laws. In Austria, for example, energy recovery declined from 70% in 1993 to 40% in 2000, partly due to special emission regulations for TDF in 1993 (MoA, 1993). The Austrian cement industry had been using the thermal input of tyres since 1979 successfully (Reiter and Stroh, 1995). According to the Regulation, the emission limits for particulates are 50 mg/m3, for SO2 200 mg/m3 and for NO2 500 mg/m3. The incineration of other waste is not subject to the same regulation but individually by other competent authorities. As a result, it has become more attractive to use alternative waste materials (e.g. plastics or animal flours) as fuel input for the cement industry.

Similar to material recycling, there is sufficient capacity available in the incineration and cement industry to use a higher proportion of used tyres than is presently the case. The British Cement Association estimates that in 1997 the UK cement industry could potentially recover up to 190 000 tons of used tyres (UK Environment Agency, 1998). This is much more than the 22 000 tons processed by the cement industry in that year. In some regions, local environmental regulations and the lack of adequate infrastructure for collection and transportation may hamper further market development for energy recovery (Amari et al., 1999). Moreover, with the landfill ban in place in Europe and several States in the US, it seems likely for energy recovery to increase as well, more especially as energy prices are expected to increase in the near future. However, several potential market failures and barriers may be causing tyre-derived fuel (TDF) to remain underdeveloped.

4.3.2. Information and technological failures

As in the granulated rubber market, different users of scrap tyres in the energy utilisation segment require different characteristics of waste. Some cement kilns can process whole tyres, while others use shredded ones. Cement kilns typically burn at sufficient temperatures to oxidise the wire and benefit from both the energy release from oxidation and the resultant iron oxide that becomes a critical component in cement chemistry. At lower temperatures, however, the energy contribution from the wire is non-existent and will account for a lower energy value than that of either a wire-free or relatively wire-free TDF.

In these facilities, steel leads to more significant ash disposal problems, so wire-free TDF will be preferred. If the steel is not removed, the TDF must be cleanly cut with minimal exposed wire protrusion from the chips to facilitate mechanical handling. The only tyre incinerator in the UK at Wolverhampton closed down mainly because the available technologies did not allow separation of good quality steel. Investments to upgrade the technology were considered to be economically infeasible (Green Consumer Guide, 2001).

Other important specifications for TDF are the fuel's combustion characteristics, the handling and feeding logistics and environmental concerns. The recent development of

American Society for Testing and Materials (ASTM) standards for TDF must be recognized as another step toward making tyre-derived materials a more accepted fuel input. The main advantage in this effort is that end users and potential end users now have an industry-accepted standard against which to compare all tyre chips. The other benefit to the industry is the development of a single sampling and testing protocol (RMA, 2002).

4.3.3. Search and transport costs and market power

Several observations can be made concerning search and transport costs. Given the fact that spatially dispersed waste generators and a fragmented recycling industry can be an indication of high transport costs, one can assume that this problem is less severe in densely populated countries such as the Netherlands. Nevertheless, the bulkiness of tyres implies relatively high transport costs. The transport of shredded tyres is about 30% to 60% cheaper, simply because fewer trips are necessary (Jang et al. 1997). High costs limit trade in used tyres in Europe and require recyclers to be near the raw material sources (Rosendorfová et al. 1998). In various studies it was estimated that transporting whole tyres for material recycling and energy recovery is not economically feasible over distances beyond approximately 150 to 250 kilometres (Sunthonpagasit and Duffey 2003b).

As a result, the area in which used tyre processors can retrieve their used tyres is relatively small. This limits the number of buyers and sellers thereby hindering the retrieval of a reliable flow of tyres, which is especially important for energy generators. This would also make an often-heralded solution to the problem of thin markets for secondary materials, the Internet, less suitable for used tyres, even though there are many sites that do offer the possibility to sell or buy tyres. Moreover, it also increases the potential for market power to be exercised in the market.

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