Expert doubts viability of multiple tire recyclers
More processors in region could leave them all struggling, he says
If more processors come into the Saskatchewan scrap tire market, the situation could end up like a hockey team with three star-calibre goalies on the roster, according to Michael Blumenthal, a longtime consultant in the North American industry.
“If you have two people who can play goalie, that's OK. If you have three, everyone suffers because there's not enough time for everybody,” he said.
The playing time in Blumenthal's analogy is a reference to the roughly 1.1 million scrap tires generated in Saskatchewan each year.
Blumenthal, a past vice-president of the Rubber Manufacturers Association who has been working in the industry since 1985, said that's not enough supply to really support even one tire processor; he contends at least three million tires are needed annually for a processor to achieve economies of scale.
Tire Stewardship of Saskatchewan (TSS), an industry non-profit that oversees scrap tire collection in the province, recently moved to bring a second tire processor into Saskatchewan. A contract was awarded for a new facility in Moose Jaw to be operated by Crumb Rubber Manufacturers (CRM) and a request for proposals was set to be issued to find a processor to operate in the northern portion of the province.
The province this week announced a Ministry of Environment review of TSS procurement practices, along with an assessment of the future needs of the tire recycling industry, placing the request for proposals for a northern processor on hold, for now. This came after outcry from Shercom Industries — which has for years been the only tire processor in Saskatchewan — and the Greater Saskatoon Chamber of Commerce, which wrote to the provincial government raising concerns about job losses at Shercom for the benefit of U.s.-based CRM.
Blumenthal applauded the call for a review, saying he believes “cooler heads will prevail” when it comes to running a viable tire recycling program.
“I think it was foolhardy to bring in a second processor,” he said, adding that Shercom has been one of just a handful of North American companies handling the entire chain of processing tires and manufacturing finished products from the rubber.
“The big problem in the industry is a lack of markets,” Blumenthal added. “And Shercom, over the last 30 years, through sweat, toil and dedication, has created a series of high-value, quality recycled rubber products, and they have markets for this. That makes everything work.”
Blumenthal said scrap tires are a challenging business where it's effectively impossible for a processor to turn a profit on just the tipping fees charged for taking the rubber. He said the fees are quickly devoured by the costs associated with handling and transportation.
“I can't tell you how many companies have failed because all they saw were the dollar signs of people paying them to pick up tires. That was a one-way street to going out of business very quickly. If you're going to be successful in this business, you need to make your profit at the back end, and that is what Shercom is doing.”
Blumenthal said it was impressive that Shercom, Manitoba's single processor and the largest of Alberta's two processors all have managed to tailor their businesses around relatively small amounts of available scrap tires, adding that all three businesses “have been around a long time.”
While CRM is a well-established firm with operations across several U.S. states and Canada, he believes having two companies split the limited pool of scrap tires means at least one, if not both, would be doomed to fail, he said.
While a little over a million tires a year isn't a lot for a processing industry, Blumenthal said it's more than enough to become a serious environmental concern if there's no one left standing to dispose of them.
“Tires are going to pile up. You'll set the clock back 30 years,” he said.