Staying Agile in Scrap Tire Markets

November/December 2018

By Megan Quinn

Rubber mats for horse trailers. Weatherproof picnic tables and benches made from an extruded rubber and plastic mix. Oversized water troughs for livestock. Long after they’ve left the road, recycled tires have a second life as products for niche markets.

 Tire recycling companies in North America say the only way to survive is by getting creative with the products they offer. Industry consolidation and shifts in major tire-consuming markets have the potential to leave mid-sized and smaller tire recyclers lost in the shuffle. With the high cost to purchase and maintain processing equipment and the regional nature of tire supply and demand, if a local buyer dries up, “it can shutter a business overnight,” says Gary Champlin, co-owner of Champlin Tire Recycling (Concordia, Kan.). “That’s why there are fewer and fewer [small] tire recyclers as the years go on. But the ones that survive can do very well and be in it for a long time. They invest and reinvest.”

Despite the challenges, smaller tire recyclers say they have survived and thrived by catering to specific niches, diversifying their offerings, and pivoting to new markets when they see opportunities. It hasn’t been easy, they say. Many have had to rethink their business model once or twice, endure layoffs, and invest up front in expensive equipment they hope will pay off in the long run. Those that last understand that tire recycling requires a mix of flexibility and creativity, says Charlie Astafan, general manager of CM Recycling Equipment (Sarasota, Fla.). “What’s interesting about tire recycling is it’s based on entrepreneurial spirit,” he says. “People who are still processors today have developed these existing markets all by themselves, from fuel to mulch to using tires as livestock feeders. It never ceases to amaze me that the entrepreneurs in this industry are the ones developing these markets.”

What small does differently

Tire recycling differs from other commodities because recyclers must create their own pricing and their own markets for most of their material, Champlin says. “Tires are not like ferrous or nonferrous [metal], where I could sell to the foundry and they’d have a price from an exchange or a metals market,” he says. With the exception of a few very established recycled tire rubber products, like infill for artificial turf, which is common enough to have a base price, “the recycler has to be very active in promoting and pricing their material for a specific niche market.”

Astafan and Champlin estimate most “small” tire recyclers process less than 3 million tires a year. Compare that to the country’s largest tire recycler, Liberty Tire Recycling (Pittsburgh), which collects and recycles about a third of the nation’s scrap tires—about 140 million tires each year, according to the company. Large and small tire recyclers might process tires to the same states, such as ¼-inch chips or crumb for turf fields or asphalt rubber, but they tend to follow different business models and woo different clients, says Mike Hinsey, international vice president of Granutech-Saturn Systems (Grand Prairie, Texas), which sells tire processing equipment. Larger companies tend to seek large national accounts that call for millions of pounds of material—markets that smaller companies can’t reach because they don’t have the volume and can’t offer the price larger companies can offer. “The high-volume [companies] need to move tonnages and move them into major markets. They don’t focus on the niche markets the way smaller companies do,” he says. “In smaller markets, they can focus on higher value instead of quantity.”

Champlin Tire, which has been around for 27 years, carved out a place for itself by offering retreading services and by selling some of its tires into other rubber markets. Its most unique product—and the one it’s best known for—is a line of picnic tables and benches made from tire rubber and HDPE, which it melts together and extrudes into molds, Champlin says. His company is the only one he knows of that makes this specific product, which it sells under the Back Atcha brand, and that means it’s up to the company to shop it around. “Salesman is just one of the hats I wear.”

Finding creative niches isn’t just a clever business strategy, it’s a way to insulate business from unfavorable market changes, says John Sheerin, director of end-of-life tire programs for the U.S. Tire Manufacturers Association (Washington, D.C.). For example, he cites First State Tire Recycling (Isanti, Minn.), which manufactures a line of rubber infill for civil engineering projects. It actively reaches out to civil engineers to propose its “green aggregate fill” as a recycled alternative for construction applications like roadway bedding, embankment support, and backfill material for septic systems. “They did seminars and educational initiatives to let the engineers know this is available,” he says. “That’s an example of a smaller scrap tire company that is really working to call its own shots and develop its own markets. That enables them to be a little more independent of the broader trends.”

There’s also lots of room for innovation in the agricultural sector, Sheerin says. Many small tire recyclers work with local farmers and ranchers to create items such as feed bunks and mats for livestock trailers. Western Tire Recycling (Tremonton, Utah) serves this niche by turning tires into large water tanks for livestock. The company isn’t the first to make water tanks from tires, but it uses oversized off-the-road tires from nearby mining companies, creating tanks that can hold up to 5,000 gallons. It’s an example of how to create a unique local market “instead of just penetrating existing markets,” Astafan says. If you only rely on existing markets, “you just lower the price, which isn’t good for anyone.”

Strength through diversity

Unique niches are great, but a tire recycler can’t hang its whole business on one unique product, Astafan says. Markets can be temperamental, so businesses must also diversify, diversify, diversify. “The biggest thing you can do in the industry is to be in as many markets as you possibly can because the markets can be seasonal, and they can ebb and flow,” he says. Tire recyclers that sell crumb for rubberized asphalt do better during construction season, and businesses that sell tire scrap chips for tire-derived fuel suffer when regional and national prices for other fuels drop, he says. The artificial turf field infill market tends to be demanding in the spring and summer but slow in the winter, and ongoing concerns over whether the rubber is safe have reduced demand significantly. Many tire recyclers and suppliers point to a list of about 100 studies saying recycled tire rubber has no adverse effects on human health or the environment, but the controversy has still left its mark on sales, Champlin says. “Over a three- to five-year period, that story took 30 percent of the infill market away,” he says. “Some businesses made all this investment, made all these customers. Then here comes something that wipes you out.”

Tire recyclers also learned their lesson about diversification in the early 1990s, when Congress passed the Intermodal Surface Transportation Efficiency Act of 1991, which required federal highway asphalt to contain at least 20 percent crumb rubber. New and existing companies hoped to cash in on the demand for rubberized asphalt and churned out ¼-inch rubber and smaller products, but demand swiftly dropped when subsequent federal legislation eliminated the requirement just a few years later. One company left in the lurch was Four D Corp. (Duncan, Okla.), which suddenly found itself with 2 million pounds of rubber and nowhere to put it. While other tire recyclers folded, “we had to find some products for the stuff, because it wasn’t going into asphalt,” Four D’s Max Daughtrey said in a 2011 interview with Scrap. The company has since diversified, first to producing cow mattresses, then to playground mulch, potting medium for agriculture, and other products.

Diversification has helped Champlin Tire keep going over the years, too. Its picnic tables are a popular and lucrative product, but their durability has a downside: “It’s hard to sell someone a second one unless they want another color—they’re made to be outside and made to last,” Champlin says. Meanwhile, the company’s retreading operation faces major competition from China, which is selling new tires that compete in price with retreaded tires. “If we were doing even 50 to 60 percent of the retreading business we were doing four years ago, that’d be generous,” he says.  

Champlin Tire has other offerings, however. The recycler makes agricultural products such as sidewalls for covering silage and containers to hold hay made out of tractor tires, and it sells tire inner tubes as a fuel product. They also supply a small Kansas-based company that makes liners for livestock trailers. “You have to be smart and pay attention,” Champlin says. “You have to watch the markets.”

Smaller tire recyclers can be more agile than larger companies when they need to make a big change to survive, Hinsey points out. “Generally, the smaller successful guys are hands-on, forward-thinking types and are able to respond more quickly to customer needs than the larger guys,” he says. A Pennsylvania-based recycler he knows, for example, has purchased and maintained equipment that can help it serve multiple markets in a flexible way. It doesn’t make the company immune to market whims, but it “could decide to make a different size of material this afternoon and start making it tomorrow with no problems,” he says.

Investing in equipment and innovation

Small tire companies may be nimble, but they must think smart as well as fast. Companies that have withstood the test of time have carefully planned out their business with an eye on capital investment and volume, Astafan says. Some tire recyclers got into the business to cash in on a federal program like ISTEA or make quick money from a state tire program that charges fees designed to support tire recovery and recycling. Those companies aren’t in business anymore, he says. “You have many customers who come into the business who are undercapitalized. They think, ‘Wow, I can be paid for raw materials,’ but they don’t understand the markets well enough and the quality and quantity they need to produce to make that into something. You have to have the mindset that you’re a manufacturer of a product,” he says.

Like any other type of recycler, tire recyclers must also have sufficient supply of incoming material. “If there is a market to develop but you don’t have access to the tires, it may not work for you,” Astafan says. “In general, you need 2 million tires a year at bare minimum, or you need a plan to get there very quickly, because of the infrastructure required to operate the business.”

Champlin agrees. “Tire recycling is capital-intensive because of the equipment,” he says. This is especially true for recyclers making products for playgrounds and turf fields because the material must meet strict safety standards. Companies that want to branch out into new markets, make higher-quality products, or start producing a new type of product for an emerging trend have to be willing to take a risk when investing, Champlin says.

Just as small tire recyclers are known for creating niche products like picnic tables and horse troughs, they’re also known for creating equipment that meets the processing needs of their specific niche. Western Tire Recyclers, for example, developed its own machine for processing OTR tires from construction and mining trucks. These tires can be up to 13 feet in diameter and need something special to cut them into more manageable chunks, says Rob Stokes, the company’s president. The machine buffs the tread from the tire while suctioning the chips for use in later applications. Then a custom blade cuts the tire into slices, which workers can transport by forklift to a more traditional shredder. Remaining pieces become the company’s signature 2,000-gallon troughs or other products.

Watching for what’s next

“There are always predictions about what the next best thing will be,” Sheerin says—the next market opportunity for making productive use of recycled tire rubber. USTMA’s 2017 U.S. Scrap Tire Management Summary hints at some intriguing avenues, he says. Between 2015 and 2017, scrap tire generation increased and the reuse rate was 81 percent, down from 88 percent in 2015.  “We’re generating more tires than we can absorb,” he says. Yet he’s optimistic the markets are improving. “Based on conversations I’ve had, 2018 will be a better year,” he says. “The economy is holding well, so tire generation will stay high. Now would be a good time to work on finding the next markets.”

Recyclers are keeping an eye on tire-derived fuel: tire chips they sell to cement kilns, pulp and paper mills, and power plants to burn as fuel. TDF was the destination for 43 percent of the tires reclaimed in 2017, but the market for TDF was down 9.7 percent from 2015, in part because of declining U.S. pulp and paper production and cheaper costs of natural gas and other fuels, Sheerin says. Recyclers are still selling TDF, but they are cautiously looking for other outlets, Champlin says. “Tire-derived fuel may be the biggest market, but it used to be much bigger.”

Sheerin says he sees encouraging developments in the asphalt rubber market. The rubber asphalt industry faces red tape from state transportation departments, which must approve its use and create specifications, and not all DOTs are convinced the material is up to snuff. (Read “Paving the Way for Asphalt Rubber” in the July/August issue for more information.) Yet more and more states are approving its use on roads, he says. The USTMA report shows about 7.4 million tires were used for roads in 2017, which is about 2 percent of all recycled tires reused that year. With the TDF market weakening, many recyclers are closely watching the asphalt rubber sector for signs it’s worth jumping into. “Rubberized asphalt has been around for 30 years, but it might be the future,” Champlin says. “To me, that will replace TDF if done correctly. TDF is a large user of tires, but rubberized asphalt could have the potential to use all the tires” the United States generates.

Two other markets that could consume significant future volumes of scrap tires have yet to take off on a large scale. The first is converting tires into liquid fuel through pyrolysis. Investors have poured money into research and development and have proven that the process works to produce fuel and energy, but none has yet been able to achieve proven long-term commercial viability. “So far, only pilot-scale projects were in our sights, but several are under construction and set to enter the marketplace on a commercial scale,” Sheerin says.  He believes pyrolysis will be the end use of at least 1 percent of U.S. scrap tires—about 3 million tires—by the end of next year.

The second up-and-coming market is carbon black, used as a pigment and reinforcing agent in rubber and other products—including tires. The industry is working on developing standards for reclaimed carbon black, “and when you have a standard, it’s easier to use in a marketplace, and customers will know exactly what they’re getting,” Sheerin says.

Though small tire recyclers are watching these markets for their potential, Sheerin says these companies will continue to nurture niche markets “that don’t show up on the pie chart,” like a company he recently talked to in Maine that uses tires as boat bumpers on fishing docks. That entrepreneurial spirit means that “the next new thing might be something no one has thought of yet.”

Megan Quinn is reporter/writer for Scrap.