2011 Waste Tire Market Report Ed Boisson May 15, 2012 CALRECYCLE Insert Pictures Here

2011 Waste Tire Market Report

Ed Boisson

May 15, 2012

CALRECYCLE

Insert Pictures Here

© Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries.2

Energy | Environment | National Security | Health | Critical Infrastructure

Outline

• Methodology• Key Findings and Trends• Exports Special Report• Implications for Market Development



Methodology



Methodology

4

Data Sources

Processor , Exporter Surveys

TDP Producer Interviews

TDF User Survey

Landfill Survey

Retreader Survey

Waste Tire Manifest System

Civil Engineering Team Data

Disposal Reporting System

Third Party Data/Reports

Anecdotal Information

Consolidated Flow Analysis

Follow-Up ConversationsCalRecycle Feedback

Draft ReportStakeholder Feedback

Final Report



Interpreting Results – Things to Remember

• Use of CA Tires, Not Total Market Size• Documented Amount of CA Tires Managed, Not

“Generation”• Results Generally +/- 10% Accuracy• Retreader Buffings Not Counted• Diversion Rate Does Not Account for Residuals

5



Key Findings and Trends



Market Snapshot



2011 Diversion Rate: 88% and Rising!

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

5

10

15

20

25

30

35

40

45

% D

iver

ted

Mill

ions

of P

TE D

iver

ted

and

Dis

pose

d

Number Disposed Number Diverted % Diverted



Reuse UpExpect Flat or Slight Increase in 2012



Crumb Rubber Up Slightly2012 Trend Uncertain



Civil Engineering DownGrowth Expected in 2012

* Based on landfill surveys; not validated by CalRecycle



ADC Up SharplyExpect Flat or Declining in 2012



TDF DownExpect Flat to Slight Increase in 2012



Disposal Down to Record Low* Trend Continuing in 2012

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Pass

enge

r Ti

re E

quiv

alen

ts

* Chart based on top 5 landfills receiving tires



Exports Special Report



10-Year Export Trend



Industry Structure and Key Decision Points



Economics*

Type of Facility Capital and Operating Costs

Revenue from Product Sales

Synopsis

Baler/Exporters • Low Investment in Equipment

• Low Operating Costs

• Rapid Inventory Turnover

• Currently Strong Pricing

Low Costs and Strong Cash Flow = Tolerance of Low Tip Fees

Established Processors (Especially Crumb Producers)

• High Investment in Land, Building, and Equipment

• Relatively High Operating Costs

• Slow Inventory Turnover Due to Seasonal Sales

• High Competition Reducing Sales Revenue

Relatively High Costs and Variable Cash Flow = Need for Strong Tip Fees

* Generalized,and simplified analysis for illustrative purposes only.



U.S. Exports of Waste Tires and Waste Rubber to Asia, 2002 – 2011*

* Source: U.S. International Trade Commission, for Harmonized Tariff Schedule , Section 4004.



U.S. Waste Tire and Rubber Exports vs. Coal Prices

* Source: U.S. International Trade Commission and World Bank Price Data.



Industry and Market Impacts

• Baler/Exporters Expanding• Increased Competition for Tires• Supply and Tip Fee Pressure for Established Processors• Cement Kilns: Shift From TDF Revenues to TDF Costs

• So Far, Overall, Non-Disposal Markets Not Declining Due to Exports• Since 2009, Exports up 6.3 Million PTE and Disposal

Down 6.3 Million PTE• But Not a Perfectly Efficient Shift • Some Processors Disproportionately Impacted

• Continuing Trend May Reduce Tires Available to Other Market Segments Beginning This Year



How Long Will Export Growth Continue? How High Will it Go?

• Drivers• High International Demand:

• Growing Industrial Production (Especially in China)• High Coal and Oil Prices• Renewable Power Regulations/Incentives• Forgiving Regulations and/or Enforcement in Some Nations• Developing Fuel Conversion Technologies?

• Attractive Economics• Current Pricing for Bales, Shreds and TDF• Cheap Ocean Freight “Back Haul” Rates to Asia• Simple, Low Investment Export Business Model

• Maturing Supply Pipeline



Potential Export Constraints and Barriers

• Maturing of Asian Scrap Tire Generation and Management Could Offset Some Waste Tire Imports

• Coal/Oil Pricing Could Drop• Asian Industrial Production Could Drop• A Global Disturbance Could Reduce Cargo Container

Availability• Importing Nations Could Change Pertinent Laws and/or

Enforcement Practices• Expanded Sourcing from Other States/Countries Could

Dilute Demand for CA Tires• Export Market is Notoriously Volatile and Unpredictable



Options to Address Export Issues

• Strengthen Permitting and Enforcement• Implement Incentives to Recycle Waste Tires in

California• Seek Legislation Requiring Notification of Waste Tire

Exports• Seek Federal Action to Impose Tariffs• Leverage International Waste Export Conventions• Encourage Voluntary Certification Programs• Accept that Exports May Play a Significant, Continuing

Role in California’s Waste Tire Management System



Market Development Implications



Market Development Observations

• Supply-Related Barriers Growing• Tire Supply and Tip Fee Pressures

• TDA Supply Challenges May Grow as Demand Grows

• Demand-Related Barriers Persisting• Need to Raise Awareness of TDPs and Benefits

• Need for Documentation on TDP Benefits

• Need to Promote TDPs Made from California Tires

• Need for Specifications Calling for/Allowing for TDPs

• Quality Standards, Best Management Practices

• Be Cautious About new Crumb Rubber Investments• Need to Document Imports, Total Market Size



TBAP Industry Wide Projects

• Outreach• State Agencies

• Caltrans Product Approval Effort

• Local Agencies

• Federal Purchasers

• Private (Architects)

• Workshops and Direct Consultations

• Best Management Practices/Standards• Feedstock Conversion Progress Review• Annual Market Reports and Incentive/EPR Report• Conference, Proposed Venture Vetting



Q&A and Comments

Send written comments on draft report by May 22 to [email protected]

Please insert in the subject line of your e-mail

Comments on Tire Market Report

Final Report projected for release in July.

Documents

2011 Waste Tire Market Report Ed Boisson May 15, 2012 CALRECYCLE Insert Pictures Here