NOVEMBER/DECEMBER 2006
Rubber processors basked in their current success and pondered their future at ISRI’s third annual Tire Recycling Business Summit.
BY KENT KISER
Scrap rubber processors hit the trifecta in 2006, enjoying high selling prices, growth in most existing markets, and new markets that could ensure continued success. “Overall, things are going gangbusters in our business right now,” said David Forrester, president and CEO of Global Tire Recycling (Wildwood, Fla.) and Tires Into Recycled Energy & Supplies Inc. (Winston-Salem, N.C.), at ISRI’s third annual Tire Recycling Business Summit. Attracting 100 rubber recyclers to Chicago in September, the summit offered seven educational workshops, a mini-expo of exhibitors, networking opportunities, and a meeting of ISRI’s Scrap Tire Processors Chapter.
U.S. rubber processors are enjoying their best times ever, said Forrester, the summit’s keynote speaker, but some big-picture issues could dampen the market euphoria, among them volatile and rising transportation costs, technological changes in new tires that could make them less recyclable, a shortage of capable and available workers, and the threat of shifting or disappearing markets due to globalization. Other causes for concern are specific to the tire processing industry, Forrester said. Some markets could suffer unfavorable shifts, such as athletic fields switching from artificial turf back to grass. An industry consolidation could affect all players.
Changes in government regulations could hinder some markets, he noted. And as scrap tire stockpiles disappear, states might abandon their tire-fee programs.
At the individual company level, Forrester outlined further issues of concern and potential areas for improvement. Solid markets will increase competition for scrap rubber, he said, prompting some processors to reduce their tip fees and creating a “real scarcity” of material in some niches. Strong markets also often lead to increases in processing capacity, which can intensify competition and lead some processors to “buy sales” through lower prices, he said.
To improve their prospects, processors must adopt higher standards of customer service, Forrester suggested. “We still fail to treat customer requirements with the urgency they deserve,” he said, particularly when it comes to reliability and quality. “Reliability, or the lack thereof, is our industry’s Achilles’ heel,” he said, asserting that it’s unacceptable to consistently miss deliveries and fail to notify customers about late shipments.
As for quality, “we say we’ll supply one specification, then we ship something else,” Forrester stated. “We simply decide to ship a customer something we know is substandard because we think we can get away with it.” The problem, he explained, is that rubber processors generally have inadequate technology to make a quality product, inadequate controls to ensure continuous quality, and inadequate operational quality standards in their facilities. “I know we are capable of excellence,” he said, “but I also know that the ongoing poor treatment of customers and vendors works against us. There’s still the perception that we are a trashy industry.”
Rubber recyclers must add value, Forrester said, using that phrase as an acrostic to spell out the keys to customer satisfaction.
A—Add to markets, don’t “buy.” Focus on expanding existing markets or opening new ones, not stealing business through lowball prices.
D—Drive improvement. Improve safety performance, cooperate with each other on best practices, and work with vendors to improve processing technology.
D—Do get involved in the industry. Each company needs to invest more time and money in propelling the industry forward via more industry specifications, stronger lobbying on labor issues, insurance assistance, better relations with regulators, and other initiatives.
V—Value. Recyclers must improve the integrity and image of the industry by meeting their commitments and demonstrating that they care as much about their customers’ businesses as their own, Forrester said.
A—Anticipate and adapt, but stay focused. “The safest course to survival,” Forrester
advised, “is to cover the broadest range of products and services you can.”
L—Live quality. Tire recyclers must make quality a “real value” in their corporate cultures.
U—Understand your business model. Know your operating costs, understand the cost of down time, and manage your operations efficiently.
E—Expect issues. The course of business doesn’t run smoothly, so be prepared for problems and don’t let them derail you, Forrester said.
Though times are good and tire recyclers have improved in recent years, “we have a long way to go,” Forrester said. “Let’s understand what we’ve accomplished. Let’s own up to our issues and add value to let the good times roll.”
Manufacturers Put Safety, Performance Before Recycling
Michael Blumenthal, senior technical director of the Rubber Manufacturers Association (Washington, D.C.), was unequivocal about the manufacturers’ perspective at the Design for Recycling® workshop: “Tires are not designed to be recycled,” he said. “Tires are not designed to be processed.” Manufacturers design tires for two purposes—safety and performance—and government standards and consumer requirements dictate both, he said.
A tire is the only automotive safety device that touches the pavement directly, Blumenthal observed. That, plus the threat of tire-related lawsuits, drive manufacturers to make tires “as safe and overdesigned as possible so that consumers have a total sense of security when they buy this product,” he said. As such, tire producers “will do nothing, ever, to compromise safety, period. Safety is their primary focus. It is what they think about.” And they’re always looking for ways to improve tires’ safety and performance.
Blumenthal described some new tire technology and its potential effect on processors. Silica, for instance, is replacing carbon black to decrease a tire’s rolling resistance and increase its gas mileage, he said. Silica increases the ash content in ground rubber, however, which is a concern of processors. Some severe-duty truck tires now incorporate a semi-liquid nylon reinforcement material that enhances strength and durability, Blumenthal said. This material can cause problems in tire processing equipment, so processors typically cull these tires from their stock and sell them for tire-derived fuel.
Several other new tire materials could create additional resistance against processing machinery and reduce the amount of recoverable rubber in the tire:
- nylon ply caps in light truck tires and higher-speed passenger car tires;
- thread-like strands of pure carbon fiber in tire sidewalls to increase strength,
- improve handling, and decrease weight;
- Kevlar and nylon under the tread of higher-end tires to suppress vibration;
- stiffer sidewalls and enhanced bead bundles in run-flat tires; and
- two high-tensile steel belts reinforced by a layer with Kevlar cord in all-terrain tires for light trucks.
In addition, Blumenthal said, some commercial truck tires have a steel inner structure that extends from bead to bead, making them virtually indestructible on the road. For processors, more steel means less rubber to reclaim from the tires and greater demands on their processing equipment. Also, a new generation of wide-base single truck tires is heavier than traditional truck tires, and the tires’ width might require processors to install a larger infeed opening on their primary shredders.
Crumb rubber producer Sam Kaufman of Edge Rubber (Chambersburg, Pa.) expressed concern about some new tire developments and their potential effect on processors. “What we have has been working,” he said, noting that “a lot of industries rely on our product as we present it today—a certain chemical analysis, certain characteristics that work.” Kaufman said he would be “a little leery” of new tire technology “that would change the makeup of how the crumb ends up and how usable it is at the end of the day.”
That said, he acknowledged that the North American tire industry is in “dire straits,” hurt by cheap imports, so manufacturers are less receptive to design-for-recycling changes that could increase their costs. Even if processors knew about tire changes in advance, Kaufman added, they might not be able to change their processing systems in time or even find the technology to do it.
Processors and tire manufacturers need to forge a more open dialogue, he suggested. By working together, the two camps can ensure the continued recycling of scrap tires and save tire producers from a public-relations problem in the future if they produce tires that can’t be recycled.
Preventing Tire Processing Fires
In 2000, a 400-watt, metal-halide light fixture exploded at Auburndale Recycling Center Inc., a tire-processing plant in Auburndale, Wis. White-hot fragments from the light ignited a fire in the plant. Employees tried to extinguish the flames, but to no avail. Then their survival instincts kicked in. They ran as fast as they could through the plant, with the fire chasing them out the door. Flames completely engulfed the plant—an old, 350-foot-long wooden structure—within 15 minutes. In an hour, the building had burned to the ground.
Jerry Swensen, Auburndale’s president, recalled that incident as “one of the toughest days of my life. Ten years of building a business, and in one hour it was gone.”
Yet Swensen says that he considers himself lucky because the tragedy could have been much worse. No one was injured, thanks to the firm’s employee evacuation plan. Also, the company lost only 10,000 scrap tires in the fire, a fraction of the 500,000 tires stored on its premises. Swensen credits those minimal losses to Auburndale’s procedures for promptly notifying the authorities and to the fast response of firefighters in the region. Thanks to their efforts, the fire was extinguished in about 11 hours.
Swensen feels fortunate for other reasons as well. Though firefighters used about 1.2 million gallons of water to fight the fire, Auburndale had to haul only about 50,000 gallons to a wastewater treatment plant afterward. Also, because the fire occurred in winter, the ground was hard and the water didn’t seep in, minimizing soil contamination. In addition, Swensen noted, “I was fortunate in that I had good community support and good customer support.”
Max Daughtrey, vice president of operations of Four D Corp. (Duncan, Okla.), could relate to Swensen’s experience. Four D also suffered a fire in 2000 that wiped out its tire processing operation. A spark from one of the firm’s tire shredders entered a baghouse containing tire fiber, which burns like gasoline, Daughtrey said. All the employees escaped, but the plant wasn’t so lucky. It took more than two days to put out the fire completely.
Swensen and Daughtrey learned some hard but valuable lessons from their plant fires, starting with the best method for extinguishing such fires. Firefighters “think they can put foam on anything, and it will kill the fire,” Daughtrey said. “That will not work on a tire fire.” Foam is ineffective on tire fires except at the earliest stages, confirmed Doug Smith of ESIS Inc. (Southfield, Mich.), a risk management services company. “After that,” he said, “it has virtually no effect.” Daughtrey explained that foam creates a seal on top of the burning rubber, but it doesn’t kill the fire underneath. When the seal is breached, oxygen reaches the fire again, causing it to flare up.
So what is the best way to extinguish burning tires? Drown them with water, Swensen and Daughtrey agreed. Auburndale found success, for instance, using construction equipment to drag burning tires through a collection pond.
To help prevent fires, Swensen and Daughtrey advised installing features such as a sprinkler system and a spark-suppression system in the ductwork of processing equipment. Determine the design of the sprinkler system—particularly how much water per square foot it must deliver—by the type of rubber product on your premises, Smith said. Though a sprinkler system is helpful, it is not foolproof, he warned, especially if a fire starts inside equipment or other inaccessible areas. That’s where a spark-suppression system comes in handy. Such equipment uses infrared sensors to detect sparks inside ductwork, where they could ignite dust, Smith said. If the detector sees a spark, it releases a curtain of water that kills the spark.
Overall, tire recyclers can minimize their fire risk by focusing on plant housekeeping and equipment maintenance, Swensen and Daughtrey noted. Housekeeping entails blowing or washing down the entire plant regularly to prevent dust buildup. Maintaining equipment prevents overheating, and keeping processing blades sharp can minimize the potential for sparks.
Recyclers also must know how to store processed rubber—especially material smaller than ¾ inch—to prevent spontaneous ignition. As Smith explained, rubber at the secondary processing stage reaches about 240 degrees F. The material should be cooled to less than 200 degrees before it’s stored. Processors can use an infrared gun to check the material’s temperature. If the material is too hot, they should spread it out to cool. Fortunately, Daughtrey noted, some systems move processed rubber by air, which automatically cools the rubber.
Offering one last word of advice, Daughtrey advised recyclers to invite their local fire department to tour their operations. That enables the firefighters to understand the layout of the operation, see the material that’s on site, and plan a strategy before a fire occurs.
Preventing Workers’ Comp Insurance Fraud
The U.S. insurance industry spends an estimated $30 billion a year on workers’ compensation insurance fraud, said David Trytek, field investigations manager for Wausau Insurance Cos. (Milwaukee).
Employees commit fraud in numerous ways: They alter medical documents; stage on-the-job accidents; get injured at a second job but claim the injury under your insurance policy; claim an injury just before a plant closing or layoff; claim the same injury with different employers; and malinger, or extend the duration of their workers’ comp benefit period, Trytek noted.
For employers, fraud is one of the major drivers of rising insurance costs, he said, offering suggestions on how employers can prevent fraud in their operations.
Communicate. Use posters, paycheck stuffers, and handouts from insurance carriers or state fraud bureaus to explain to employees what constitutes fraud, how detrimental it is, and its potential consequences.
Hire wisely. Conduct in-depth interviews of job candidates, looking for warning signs or a history of questionable insurance claims.
Provide a thorough orientation. Review with new hires your company’s safety procedures, its injury-reporting rules, and the consequences of making a false claim.
Conduct exit interviews. Whenever you terminate employees, ask if they have any work-related injuries before they leave.
Organize safety teams. Workplace safety teams promote safe operating behavior and provide peer pressure that helps prevent employees from making fraudulent claims.
What should employers do if they have a suspicious claim? Trytek advised taking these steps:
- Interview all parties involved, starting with the injured worker, preferably face-to-face because it’s much harder for someone to lie in person. If possible, photograph the person. If you later decide to conduct surveillance, you’ll need a photo to show an investigator what the person looks like.
- Conduct an in-plant investigation.
- Interview the claimant’s supervisor and coworkers, review the employee’s job description and work duties, and even videotape another person doing the claimant’s job.
- Do a complete background check on the claimant. Check the person’s Social Security number to see if he or she is using a false identity. It’s also useful to search public-record databases and civil and criminal records to see if the employee has a questionable history.
- Review medical reports about the claimant’s injury and treatment. For instance, Trytek said, check dates of treatment to confirm that medical services were actually provided on those dates. Also, review the injury history provided in the medical records to make sure the employee’s story is consistent. Whenever possible, obtain original documents so you can check for alterations by the employee, he said.
- Conduct surveillance on the claimant.
Supervisors play a crucial role in battling fraudulent claims, particularly at the accident-reporting stage, Trytek said. “When a worker makes a passing comment about an injury,” supervisors should “take a minute, stop, and ask some simple questions,” then document the responses in the worker’s file, he said. When an employee is out on a workers’ comp claim, supervisors must also “keep in touch with the employee to make them feel they’re still part of the team,” he added.
Employers who believe they have a suspicious claim can contact the National Insurance Crime Bureau or, in 44 states, the state workers’ comp fraud bureau. Fighting such fraud is worth the effort, Trytek said, not only for the insurance industry—which in 2003 recovered $198 million in restitution from fraudulent claimants—but also for scrap recyclers, who will enjoy lower premiums.
Assessing TDF and Groundcover
Tire-derived fuel has long been the largest market for recycled rubber. On average, TDF provides about 15,000 Btus per pound, giving it a mid-range energy value between petroleum coke and traditional coal, said Dennis Glenn, sales manager, co-processing, of Energis LLC (Midlothian, Texas), a subsidiary of cement manufacturer Holcim Inc.
Holcim and other cement producers are significant consumers of TDF as an alternative fuel in their kilns. When using TDF, Glenn said, Holcim has three basic requirements: Its facilities must be able to handle and consume the scrap rubber safely, the material must either improve or have no effect on its emissions, and the TDF must not degrade the properties of its final cement.
Eight of Holcim’s 11 cement kilns—both wet and dry models—either have used or are using TDF. In both wet and dry kilns, producers must hold the fuel and the cement feed in balance, Glenn said, noting that “the temperature profile is critical.”
There are pros and cons to feeding TDF into a cement kiln at the front end versus mid-kiln, Glenn explained. Injecting TDF at the front end means “all the heat has to come in on the front side of the kiln, and you have potential hot spots that can cause refractory damage.” Though mid-kiln feeding introduces cool air into the kiln, it allows producers “to stabilize the fuel mix from the front to the back and frees us from putting so much fuel in the front side of the kiln,” he said.
TDF isn’t the only or the most economical alternative fuel for cement producers, but it is “readily available and is a good fuel source,” Glenn said. “Our goal is to save money on the fuel end.”
Beyond TDF, other recycled rubber markets—such as groundcover applications—have the potential for significant growth. About 28 percent of U.S. households use some type of mulch, generating sales of about 20 million cubic yards of mulch annually, said Gary Giller, president and CEO of GroundScape Technologies (Brooklyn Heights, Ohio). Tire recyclers “hope to capture about 5 percent of that market,” he said.
Given that rubber mulch costs $500 to $600 a cubic yard, compared with $20 to $25 for wood mulch, this represents “a huge market opportunity for us,” Giller said. Despite its higher cost, rubber mulch has many selling points, he noted: you can use less of it, it requires no maintenance, it doesn’t degrade, it’s an environmentally friendly product, and it comes with a color warranty.
What does it take to be a player in the groundcover market? Giller outlined the following points:
- Offer a branded product, one with a distinct identity in the market.
- Develop a national operation in terms of a sales force, warehouses, and production operations to achieve economies of scale, maximize manufacturing efficiencies, and minimize the distance you must transport raw materials and end products.
- Deliver a quality product. Retailers and customers demand a product with consistent quality and no surprises, like residual tire wire, especially if you sell your product in mass merchandiser outlets like Lowe’s and The Home Depot. GroundScape Technologies just spent $100,000 for a new magnet system on its production line to catch any residual metal, Giller said. “You just want to provide the safest, best product, because you’ll get a lot of great advertising by word of mouth,” he said.
- Create “buzz” for your product through sales and marketing support, including advertising, product demonstrations at sales outlets, and word-of-mouth referrals from customers, Giller said.
- Have a strong financial foundation. This is critical because the groundcover market is a seasonal business. You must be able to finance your inventory during slow periods, Giller noted. Also, if you sell to large retailers, you’ll need to finance an inventory large enough to supply them.
Though recycled-rubber groundcover is “rapidly gaining acceptance” and has a promising future, this market has its challenges, Giller said. Rubber recyclers face higher costs of doing business related to energy, transportation, labor, and raw materials, but they can’t pass all of these costs on to customers, he noted. Other challenges include
- new competitors constantly entering the groundcover niche;
- ongoing pricing pressure from big retailers, who “really hammer you on the price,” Giller said;
- stiffer competition for a finite amount of raw material, especially buffings; and
- warranty issues, particularly related to the color durability of recycled-rubber mulch. GroundScape’s products carry a 10-year color warranty, Giller noted, but other manufacturers offer a lifetime color warranty, which he views as unrealistic.
Illegal Immigration Heats Up
Tire recyclers, like all U.S. employers, face various labor challenges, including how to deal with workers who might be illegal immigrants. This is a controversial issue in the United States at all levels of government, said Ann Morse, director of the Immigrant Policy Project for the National Conference of State Legislatures (Washington, D.C.).
Currently, 36 million people in the United States are immigrants, and they constitute about 12 percent of the U.S. population. That’s the greatest proportion since immigration’s peak in the early 1900s, when nearly 15 percent of the population was foreign-born, Morse reported. Roughly a third of today’s immigrants are naturalized citizens, another third are here legally, and the other third—about 11 million people—are illegal immigrants, she said.
About 6 million of the 11 million illegal immigrants are from Mexico, with an additional 1.4 million emigrating from El Salvador, Guatemala, India, and China, Morse noted. Illegal immigrants to the United States enter mainly through six states: California, Florida, Texas, New York, Illinois, and New Jersey, Morse said. Once here, immigrants settle broadly across the country, including “many new environments” such as the South, Midwest, and Rocky Mountain states.
Each year, about 1 million immigrants enter the United States legally and 500,000 enter the country illegally. Of those, about 60 percent enter the country without authorization and 40 percent overstay or otherwise violate the terms of their visas, Morse said.
Many of these immigrants come to fill jobs in the U.S. economy, which has needed 1 million new employees annually in recent years. The United States grants only 80,000 legal employment visas a year, which is “part of the reason why illegal immigration is increasing so much,” Morse explained.
Illegal immigration has become a hot-button political issue for several reasons, including the terrorist attacks of Sept. 11, 2001; the growing number of illegal immigrants; and the Bush administration’s efforts to reform immigration law.
The intense public scrutiny of this issue is putting pressure on states and the federal government to take some kind of action. In 2005, Morse noted, state legislatures introduced 300 bills on immigration issues, three times as many as the country might see in a typical year. Only 38 of those bills became law, however.
On the federal level, the government eliminated the Immigration and Naturalization Service in March 2003, dividing it into three new agencies under the Department of Homeland Security, said Valentin Obregon Sr., a community liaison officer in the Chicago office of one of the new agencies—U.S. Citizenship and Immigration Services. The three agencies “all have the same responsibility of enforcing our immigration laws,” he said, but each one has a slightly different focus.
- U.S. Customs and Border Protection (www.cbp.gov), based at U.S. points of entry, secures U.S. borders and facilitates the flow of legitimate trade and travel.
- U.S. Immigration and Customs Enforcement (www.ice.gov) enforces federal immigration laws, customs laws, and air-security laws.
- U.S. Citizenship and Immigration Services (www.uscis.gov) essentially administers benefits related to immigration and naturalization issues.
Though federal immigration laws are strict, “employers are not expected to be immigration officials—we are,” Obregon said. To prosecute an employer for hiring an illegal worker, he explained, the government must show that the employer knew the worker was an illegal immigrant at the time of hire. Otherwise, the employer is not liable.
To steer clear of such trouble, employers must know the requirements in the federal Handbook for Employers, which includes instructions for completing Form I-9, the Employment Eligibility Verification Form, Obregon said.
Kent Kiser is publisher and editor-in-chief of Scrap.