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Nongnard Sunthonpagasit, Michael R. Duffey∗
Department of Engineering Management and Systems Engineering, School of Engineering and Applied Science, The George Washington University, Suite 110 1776, G-Street, Washington, DC 20052, USA Received 7 November 2002; accepted 24 April 2003
Abstract Crumb rubber can be produced from scrap tires in a wide range of particle sizes and quality levels. Ideally, the revenue stream includes tipping fees paid to receive the raw materials; sales of variously-sized crumb products to different end-user markets; and potential sales of scrap metal and ﬁber contained within the tires. General demand has been increasing, and submarkets for crumb products are growing in size and variety. However, the optimistic expectations of potential investors and government agencies contrast sharply with the experiences of many current and former producers. Production planning and operation is complex, real-dollar crumb prices have fallen, and many producers recount difﬁculties ﬁnding stable markets and competing against newer, state-subsidized competitors. This paper examines the engineering economics of crumb rubber facilities. Following a literature review and interviews with producers, a ﬁnancial model of a nominal processing operation was created to aid the analysis of different market, crumb size, and production scenarios. The proﬁtability of a crumb facility appears to be particularly sensitive to crumb rubber prices, operating costs, and raw material availability. Better analysis of market and production impacts on ﬁnancial viability for proposed processing facilities would aid overall market efﬁciency. © 2003 Elsevier B.V. All rights reserved.
Keywords: Crumb rubber; Engineering economics; Production feasibility; Recycling; Scrap tires
1. Introduction In 2001, about 281 million scrap tires were generated in the United States. Roughly 75% of these tires were reused in some type of secondary market. The largest reuse market was for
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1999).) tire-derived fuel (TDF). 2). Civil engineering applications. which are: (1) large or coarse (3/8 and 1/4 ). Crumb sizes can be classiﬁed into four groups. 1998RRI.003 ). Klingensmith et al. animal bedding. 2002.. accounted for about 15% of scrap tires.079 –0. As a result. 1994. 22% for ﬁne sizes. Of all scrap tire reuse options. CWC. (3) ﬁne (40–80 mesh or 0.016 –0. etc. 1999a. 1998RRI. (2) mid-range (10–30 mesh or 0. only about 2% of scrap tires generated in the U. but by 2001 this had jumped to about 12% (Fig. but our best—but still rough— estimate would be that recent demand has been about 14% for coarse sizes. Different producers in the same crumb market (e. and 12% for superﬁne sizes.b. 52% for mid-range sizes.039 ). also known as ground rubber. 2001Serumgard 1998. 1996. Other markets for sports surfacing. sources for above estimates cited in caption). 1. in terms of both production and markets. Aggregate market data in the crumb industry is scarce. Crumb rubber is described or measured by mesh or inch. were reprocessed as crumb rubber.Fig. (Sources: Blumenthal and Serumgard. In 1994. molded products) may require different crumb sizes to produce their unique products. Markets for asphalt modiﬁcations and molded products each accounted for about 30% of crumb rubber usage in 2001. automotive products. The third major reuse application was crumb rubber. in which tires are shredded for applications such as leachate collection in landﬁlls and for highway embankments. 1. Particle size and particle size distribution requirements of crumb rubber depend on the crumb end user (Baranwal and Klingensmith.g. Estimations within the . and (4) superﬁne (100–200 mesh or 0. it appears to be difﬁcult to generalize particle size requirements in each crumb market.007 ). and is generally deﬁned as rubber that is reduced to a particle size of 3/8-in or less. 2000RRI. RRI. Higley. crumb rubber is probably the most complex but least studied. Liaskos. Scrap tire utilization alternatives.S. This appears to be one source of difﬁculty for crumb producers when attempting to forecast market demand and production planning. principally for use as a supplemental fuel in cement kilns (probably about 33% of total scrap tires generated).006 –0. A more comprehensive discussion of scrap tire markets can be found in Sungthonpagasit and Hickman (2002). have also experienced growth (Fig. 1998.
1%). Fig. and high consistency. and molded products. 3/8 . highly regional pricing situation affected by crumb quality. The sparse published data for national price averages provide only an incomplete picture of a complex. 80. 2001RRI. In general. 2. A perception among many established producers is that new-entrant competitors. competitive pricing factors. recycled crumb rubber should be stored in a cool and dry place. and negotiations between producers and end-users.5% of total weight).) different market segments of future crumb market growth are contradictory. 1998RRI. 3) indicate that the greatest variation in prices has been for 1/4 . importers. purchase quantity. some other producers stated that the ﬁne size has the highest potential usage. 3 shows data published for 1996–2002 for national average prices per ton for different sizes of crumb rubber. currently there are few quality standards for vendors and customers. therefore. . low metal content (less than 0. playground materials. especially in molded and extrusion markets. Deﬁnitions of quality appear to be quite diverse and driven by customer speciﬁcations unique to different market segments. Although a focus on ‘quality’ is described by many as critical to succeeding in the crumb business. Discussions and a review of literature suggested that 1/4 —20 mesh has the most potential growth for the near future for sports. as well as price ranges for 2001. Excess moisture content limits the crumb uses in many applications. mats. It would appear that real-dollar prices dropped somewhat across most crumb sizes. (Sources: RRI. crumb coloration. 2002. Crumb rubber markets (million pounds): North America. Crumb average prices and price ranges (low-high) in 2001 (shown in Fig. and producers of lower-quality crumb are putting downward pressure on crumb rubber pricing in order to secure some market share or to sell excess inventory at slashed prices. Excess heat during processing can degrade the rubber. due to price competitiveness with virgin rubber products. and 100 mesh. impact of subsidies. and 200 mesh. especially in molded rubber and composite products.Fig. An accepted maximum level of moisture content is typically about 1% by weight. turf. most signiﬁcantly for 40. a ‘high quality of crumb’ means low ﬁber content (less than 0. In contrast.
Some producers prefer to process only truck tires due to lower textile cord content. 1996. Crumb rubber average prices (current $/ton). Another producer claimed that coloration is not important because after grinding crumb to a small size. recycled crumb can deteriorate rubber compound properties in a new tire by reducing tire durability and longevity leading to increased tire replacement frequency (Phillips. For example. 2001RRI. however. it seems to be very important to speciﬁc markets.. RRI. and quality varies from operation to operation. Everyone has his/her own unique system to produce crumb rubber. Document Undated). The lack of standards for processing crumb is clearly a barrier to the maturation of a market for recycled crumb as a commodity material.) Coloration appears to be less of a concern than other issues. Acquisition of incoming scrap tires Before investing time and money in crumb rubber production. 2.Fig. (Sources: RRI. and 200 mesh is incomplete for 1995. 1997). 3. One producer processed truck tires separately from passenger tires only when getting special orders from customers who require all black crumb. 1999RRI. the quality of recycled rubber is in general lower than virgin (natural and synthetic rubber) products. while for some other molded products there are no preferences. 2002) (Note: Market data for 80. 1996. white color cannot be seen. . producers must consider strategies for obtaining scrap tires in their acquisition territory with effective tipping fees. Some molded market end-users may require all black crumb for their unique products. mixed processing of passenger and truck tires. Coloration and ﬁber content speciﬁcations appear to inﬂuence producer decisions about separate vs. which they claim results in higher price and demand (Capelle. 100. Blumenthal et al. Moreover.
Engineering markets and environmental concerns Aside from the market segments shown in Fig. 5 years in Virginia. waterprooﬁng. they appear to pose no signiﬁcant. which are less costly to process than smaller-sized crumb. and state and local environmental regulations. transportation costs. could also impact scrap tire availability for crumb production. Currently. 1999). especially septic system liners. affecting ‘secondary’ DWS (Blumenthal. which he anticipates as an important future market. 2002). New York Roundtable. For example. 2000). 2000). An EPA-sponsored . the steel belts exposed at the cut edges of the tire shreds may increase the levels of iron and manganese. and approval in Delaware is pending. which is then cured at ambient temperature. Fees depend on many factors. One former crumb producer interviewed for this research had re-engineered his process for a simpler and lower-cost shredded-tire product for civil engineering applications. Another recently developed spray system mixes 1/4 crumb rubber and latex ﬂuid in a gun to spray onto a running track surface in 1/8 layers for sun curing (CIWMB. treated plywood roof sheathing is produced by applying a latex emulsion with 20 mesh rubber to one side of plywood. Kearney. 3. septic applications have been approved and used for 10 years in South Carolina. A new rubberized coating material using 4 mesh crumb and a bonding material has been developed which can be sprayed on sound barrier walls to help eliminate noise from busy roads and highways (RRI. 2 years in Pennsylvania. 2. including scrap tire types (tires containing rims and bias/radial tires). regional conditions. there appear to be many other potentially promising market niches which may have future impact. which are effectively a ‘negative cost’ for raw materials.Fees.5 microns) and particle-bound polycyclic aromatic hydrocarbons (PAHs). As long as tire shreds are placed above the water table. 1997. For example. Blumenthal and Serumgard. However. Fees increased on average by about 32% for passenger tires and 25% for truck tires during 1993–2001 period (RRI. as well as increased transportation costs for a wider acquisition territory. the use of scrap tire derived material (STDM) for civil engineering applications (CEA) has primarily been driven by state initiatives. Questions are often asked about potential market impact of known and potential environmental risks associated with scrap tire materials. In 2001 the national tipping fees for a passenger car were in the range of $34-300 per ton with an average $97 a ton while truck tire fees were in the range of $34-300 per ton with an average $113 a ton. 1997). and anti-skid surface that decreases the accident rates caused by slipping (CIWMB. High competition to obtain the raw materials may cause a downward pressure on tipping fees (New York Roundtable. Another environmental consideration that could impact crumb markets speciﬁcally is potential worker exposure to ﬁne respirable particles (<2. defray operating expenses and impact the producer’s ability to keep crumb selling price competitive with other scrap processors and their virgin counterparts. The future of markets that use larger-sized shredded tire pieces. 1990. A latex emulsion serves as a vapor barrier. 1999a. market demand for scrap tires. There is no evidence that tire shreds increase the concentration of metals of concern in meeting a ‘primary’ drinking water standard (DWS). 1997). The most cited concerns probably relate to civil engineering applications and the effect of tire materials on water quality. known health or environmental risks.
mesh sizes and quality. 4.study of road paving workers in crumb rubber modiﬁed (CRM) asphalt applications indicated their potential exposure to ‘elevated airborne concentrations of a group of unknown compounds that likely consist of the carcinogenic PAHs benz(a)anthracene. a nominal production process was synthesized from site visits with producers and a review of the published literature. Fig. 4 shows a nominal ambient grinding process that can produce high quality crumb rubber ranging in size from 3/8 to 80 mesh. 4. Nominal ambient grinding process. No references were found for similar monitoring studies for workers at ﬁne mesh-size crumb production facilities. Ambient grinding (as opposed to cryogenic grinding) is the production process used by the majority of crumb producers. however. Production process Due to the heterogeneous mix of end-user markets. it is difﬁcult to deﬁne hard-and-fast criteria for the engineering economics of crumb rubber. To establish a baseline for this study. chrysene and methylated derivatives of both’ (Watts et al. but industrial hygiene and worker liability might be potential future cost issues that bear watching.. 1998). This nominal Fig. . and production conﬁgurations.
4. still attached to metal or ﬁber scrap) is found to be 8% for the shredding process. 3). Producers stressed in their interviews that sustained throughput yields are lower and maintenance requirements higher than the optimistic assessment of equipment manufacturers. and auxiliary equipment required for the nominal facility.1% metal. or (2) further reduced to smaller sizes. 2000). and coloration. passenger vs. The tires are re-introduced to the tire conveying system to reduce the whole tires thru shredding and granulating down to various sizes. Moreover. Visual inspection and sorting is an important ﬁrst step to ensure that the scrap tires are suitable for processing.9% metal-free products can be either: (1) marketed as-is for numerous applications. After passing through each process. tires containing rims are de-rimmed. end-product yields. The rims are combined with the metal stream (tire wire) from the tire recycling process. the higher the investment and operating costs. A magnetic metal removal and ﬁber screening system are incorporated. but equipment that maximizes ﬂexibility—both for the types of incoming scrap tires and changing mesh sizes and quality to meet varying market demand—was considered by most to be the best choice. One rather obvious rule-of-thumb is that production cost and selling price are a function of crumb size (see Fig. Maintenance costs can reportedly be higher in practice than the costs claimed by equipment manufacturers by up to 200–300%. Mesh sizes of 3/8 with 95% metal-free products and 5–30 mesh with 90% ﬁber and 99. classiﬁed into three groups (coarse. 6% for the granulating process. but also on process costs. quality. truck tire) not only has an impact on tipping fees. the type of tire collected (e. mid-range. and metal and ﬁber fragments removed at various stages of the process are conveyed to central containers for later sale or disposal.crumb process is designed to process passenger tires and truck tires in separate batches and can alter the mesh size of output depending on customer speciﬁcations and market requirements. 4. increase particle size fraction. and ﬁne size).e. and 4% for the powder process.g. the surface modiﬁcation market requires small-size crumb with high quality while the animal application market requires a larger-size crumb with lower quality. the rubber waste (i. rolling stock. Processing equipment suitable for passenger car tires may not be suitable for truck tires even at low volume because steel-belted truck tires containing high percentages of reinforcing wire are considerably more difﬁcult to process than passenger tires (Gray. Worn equipment can reduce processing capacity and production rate. Some of the comments from producer interviews and the literature review are summarized below. For example. Passenger tires and truck tires are separated. There are many types of size-reduction equipment for scrap tires. Operation and maintenance (O&M) O&M costs relate to processing equipment. Capital investment Market analysis and its implications for product and process speciﬁcations and capacity planning are critical for investment decisions. The powder process can reduce the mid-range crumb sizes to 40–80 mesh crumb containing 5% ﬁber with 0.2. and requires . The smaller the crumb size.1.
2001. 1997)..a lot of money for rebuilding (Capelle. One producer claimed that his shredder machine processes 10 tons per hour when the knife is new. the removed beads contain too much attached recyclable rubber causing poor quality scrap metal and lower recycled rubber yields. Some rubber particles remain attached to steel fragments.4 a ton and labor costs are about $11. the relative . and other variable costs are largely a function of the product mesh size. UNEP. the rubber is expected to lose as much as 20–40% of material by magnetic separation systems (Astafan. One crumb producer claimed that tooling and expendable material costs are about $27. After passing through each process (shredding. tires containing rims and beads are sometimes sorted for de-rimming and de-beading operations. Tires containing rims can cause excessive wear on the shredder knives. 6. or 5 cents a tire. 2001. 5). Hershey et al. a magnetic system is used to remove steel fragments. Service lives of perishable items. 1999. but only 5 tons per hour when near the end of the knife’s life. and pigments) while one scrap truck tire (nominally 100 lbs) contains 84.0% rubber compound (including chemicals. With poorly maintained debeading equipment. A general observation in crumb production is that ﬁner particle sizes have greater surface area and cleaner crumb rubber. Capelle stated that the metals screened out in a shredding operation contains loose and adherent residual rubber (or waste rubber) in amounts of 5–8% while the rubber waste from a granulating operation is about 5–6%. Capelle claimed that shredder knives have to be replaced after 60. granulating and powder process).3 a ton. 4.000 tires is about $10. This was somewhat lower than yields cited by some manufacturers of state-of-the-art size reduction equipment (Fig. at the 1×1 in particle size. In general. 1987. are generally shorter than those projected by the manufacturers. After processing.000. For example. 2000).5% rubber compound. Product yields One scrap Passenger Tire Equivalent (PTE) = 20 lbs. The front-end of processing is the most labor-intensive and signiﬁcantly affects downstream operations. processing types and separating systems.000 truck tires while toothed rolls in the ambient grinding process have to be recoated after processing about 1500–2000 tires (Capelle. and before processing each PTE contains on average 86. TNRCC. 2000. Producers and some industry references stated that about 50–60% of a scrap passenger tire can be processed as crumb rubber. depending upon the sizes of crumb (Gray. such as working experience. the relative percentages of the recyclable materials will change. 1997). but require longer processing time and hence more power and labor. such as shredder knives. In general.000 car tires or 10. The change depends on many factors. MES. The balance point between costs of changing knives and maintenance and the processing rate appears to be one important operational secret to keep the costs down. quality and quantity. labor. Also. which affects crumb rubber end-product yields. oils. Most producers separate passenger and truck tires due to different ﬁber and steel compositions which affect end-product quality and coloration. energy. scrap passenger tires have more ﬁber (4%) and less metal (10%) as opposed to truck tires that have almost no ﬁber (<0.5%) and much more metal (15%) (Dufton. One chip producer stated that the cost for replacing knives after 200. 1996). not including labor and other signiﬁcant costs. 2001). 1995. Generally.3. RMA. RMA. The method used to calculate the product yields for each process step is shown in Fig.
and 0. only (1 − X%) × 1 Ton of raw materials is next transported to the granulator process.068 tons of rubber waste. 95% of metal is removed and 6% residual rubber is lost. The nominal process (shown in Fig. 5. only (1 − X% − Y%) × 1 Ton of crumb rubber is available.83 tons of rubber compound. 0. then the output after the shredding process will contain 0. If X% of 1 Ton PTE is removed after the shredding process. the 3/8 crumb mesh size is an optional product. As this nominal process is ﬂexible in output sizes and percentages.Fig. 4) assumes that after passing through the shredder.095 tons of metal. . and the percentages can be varied. If the total weight of an incoming batch of scrap passenger tires is 1 ton. Crumb rubber plant cost model. At the ﬁnal stage of the process. percentages of end-product compositions will change.
4. Transportation Typically. sizes of scrap tires. A 1993 EPA report indicated that transportation charges for whole tires averaged 15–20 cents per ton-mile if hauled within .4. and distances from recyclers to collectors.Fig. recyclers need to be near the raw material to decrease transportation costs and guarantee procurement. Hauling costs depend on many factors. fuel costs. 6. labor costs. PTE end-product yields. including truck size. Gray stated that average one-way trucking costs in 2000 were about $20 per ton for each 300 miles covered and would be double if the truck returns unloaded.
000 tons/year production facility that can process crumb mesh sizes down to 80-mesh. The Texas Natural Resource Conservation Commission found that transportation costs are generally affordable within about 100 miles of a processing facility while Hershey found that the rule of thumb for hauling costs is not to haul more than 150 miles (Hershey et al. decrease tipping fees. variable cost per ton for labor. This crude approximation seemed reasonably consistent with. energy) roughly follows the number of ‘cuts’ required to reduce a cubic volume of raw material to its ﬁnal particle size. the longer the processing time. sources of pre-shredded scrap tires can reduce transportation cost by 30–60% (USEPA. and surveys of crumb rubber producers and crumb rubber end-users. but they are nonetheless a subjective amalgamation of different sources. different machine speciﬁcations (% yields of end product). the total number of cuts required to reduce the original cube to smaller cubes with side length S is. etc. Table 1 shows industry estimates for a 15. A decomposition of cost and revenue sources is shown in Fig. The model was created to be able to examine different processing capacities (up to 15. (1991)). the more the energy and labor consumption. It should be noted that much of the underlying ﬁnancial and engineering data in this model have been reviewed by several industry experts.e. 5. In some developed regions. but obviously ignores complications due to stress theory. for example. Hershey stated that the hauling costs for an 100-mile run are approximately $10 a ton for a 12-ton load of whole scrap tires and $21 a ton for a 25-ton load of 2-in chunks (Hershey et al. .. and increase transportation costs required to obtain raw materials outside of the immediate acquisition territory. (1) The more the number of cuts. using data collection. however. etc. Variable costs are calculated using weight as the cost driver (i. Engineering economics The preceding sections presented some of the production process issues relevant to the conﬂicting perceptions and evidently high number of business failures experienced by new crumb processors. and different market crumb price and size requirements. see Bearman et al. The rest of this paper explores aspects of the engineering economics of crumb processing. This may affect consistency of scrap tire supply. particularly those encouraged and supported by state governments. Since three slices through a cube with side length L are required to cut it into 8 smaller cubes. interviews. mass-speciﬁc breakage energy on particle size.g. 5. energy. variations and assumptions were developed. A baseline scenario. Number of cuts = 3(L/S − 1).an 100-mile radius. 1987TNRCC and TXDOT. different crumb size capabilities (3/8 up to 80 mesh). and types of cutting materials (crushing resistance of the roll and knife strength. document reviews. A discounted cash ﬂow model of a rubber reprocessing facility was created as a means to help analyze different market and production scenarios. energy usage and processing rate data for size-reducing equipment. using the data gathered from processors and public sources. 1987).000 tons a year). As a simpliﬁed approximation. there is a high competition to obtain the scrap tires. and the higher the selling prices..) for each mesh size. 1993). crack propagation in particles. 2001). the relationship between mesh size and some types of variable costs (e. different sources of scrap tires (truck and car tires).
Where possible.00 13.28 × Crumb size (inch) −0. cost-capacity factors derived from actual data were used in power sizing techniques to model variations in equipment investment and some ﬁxed and variable costs for different plant capacities and mesh-size capabilities.85 85.00 0.39 0.10 27.91 × Crumb size (inch)−0.0319 Labor hoursTruck (h/ton) = 0.00 0.211 Labor hoursPTE (h/ton) = 0. Misc ofﬁce expense.19 2.27 × Crumb size (inch)−0.Table 1 Baseline costs for nominal 80 mesh crumb rubber production Year 0 Investment costs Crumb rubber plant (million $) Transportation equipment (million $) Project costs (million $) Variable costs Direct operating expenses Total operating labor (included beneﬁts) ($/h) Variable overhead (%) Variable facility operating expenses Disposal costs ($/ton) Packaging costs ($/ton) Maintenance costs ($/ton) Transportation cost ($/ton) Electricity price ($/kW h)1 Fixed costs Administrative expenses (included beneﬁts) (million $/year) Other administrative expenses (million $/year) included Product marketing + travel.80 0.00 Sources: Dexter (2002).0212 (2) (3) (4) (5) (6) .00 25.15 0. The power sizing technique assumes that cost (C) varies as some power of change in size or capacity (S).05 0.60 2. The power sizing equation is shown below where X is a cost-capacity factor.23 8.00 269. USDE (1999) and USDL (2002). CA /CB = (SA /SB )X Some examples of estimation equations for energy and labor were Energy consumptionPTE (kW h/ton) = 97.5 × Crumb size (inch)−0.00 14.222 Energy consumptionTruck (kW h/ton) = 103.00 52. Note: All costs are varied with general inﬂation over the 10-year study period. and Professional service + others Building Lease + tax + insurance (million $/year) Lease escalation per year (%) Fixed power costs (million $/year) Others Working capital ($/ton) Labor availability (%) 3.
Revenues for the scrap tire recycling facility come from two sources: (1) tipping fees. 6 See Fig. The baseline price escalation assumption reﬂected the perception in Table 2 Baseline prices and quantity information for all scrap tire products Revenue types Tipping fees: PTE Tipping fees: truck Scrap metal Scrap ﬁber 1/4 crumb: PTE 10 mesh crumb: PTE 20 mesh crumb: PTE 30 mesh crumb: PTE 40 mesh crumb: PTE 80 mesh crumb: PTE All size crumbs: Truck Source: RRI (2002). Z = 27%.S. When market prices for scrap steel or ﬁber drop to zero (as in the baseline scenario). The nominal scrap facility is assumed to be located in the U. Y = 64%. 6 See Fig. A = 33% See Fig. D = 80% See Fig. tipping fees. Z = 27%. 6.55 155. consistent with some of the crumb producers interviewed. This seems a reasonable assumption. are truck tires (average 100 lbs each) and 84% are passenger tires (average 20 lbs each).For the baseline scenario. a production ramp-up of three years was assumed to gain process familiarity and obtain market share. 6. and crumb products and the percentage of scrap tire delivered and processed to various products are shown in Table 2. 6. The baseline scenario assumes incoming tonnage is 50% from passenger tires and 50% from truck tires. Prices in yr 0 ($/ton) 115. one for passenger tires and the other for truck tires. with zero salvage value. The baseline prices of scrap metals.S. The nominal process consists of two shifts. (c) sales of scrap ﬁber. 6. disposal costs must be assumed. The selling prices of crumb rubber from truck tires (black crumb) are assumed in the baseline to be higher than those from passenger car tires (because of black with white speckles) by 20%. B = 33% See Fig. Mid-Atlantic region.000 tons) by the end of Year 3. Y = 64%. 6. and (2) product revenues. Roughly 16% of the number of scrap tires generated in the U. Other considerations such as zoning regulations and permits. A simpliﬁed 10-year straight-line depreciation is assumed for the plant equipment and rolling stock investments. (b) sales of scrap metals. but it should be noted that possible legislation that would allow accelerated depreciation or tax credits for certain types of recycling projects could potentially have a signiﬁcant impact on short-term liquidity. state regulations. and environmental regulations are not addressed. and the deﬁned market area and sources of scrap tires for the nominal facility is the Atlantic seaboard (Table 2). Only equity ﬁnancing is assumed as is typical for this type of preliminary feasibility analysis. Y = 64%. which include: (a) sales of recycled crumb rubber. One uncertainty factor for product revenues is the price of scrap metal and ﬁber. The minimum attractive rate of return (MARR) is assumed to be 10% (including inﬂation) while the marginal tax rate is 45%. Other equations to calculate revenues and costs are described in Table 3. ﬁbers.78 0 0 221 227 267 310 358 420 Higher than PTEs 20% Quantity 600 000–750 000 car tires 120 000–150 000 truck tires See Fig.000 tons with arithmetic growth to plant capacity (15. The study period is 10 years. C = 33% See Fig. 6 X = 9% See Fig. worker safety. The quantity of scrap tires in the ﬁrst year is assumed to be 12. E = 20% Same as PTE .
. Sixty-three percent of annual revenues came from crumb rubber sales and 37% from tipping fees. Excluding amortized investment and ﬁnancing. 10 mesh. Financial feasibility of facilities The base case. assumes crumb prices and tipping fees both increase with 3% general inﬂation. 6. (2) and 3. 3 = see Eqs. 20 mesh. scrap tire types (PTEs and truck tires). The effects of ± 50% changes in the nominal values for the most sensitive variables. j. and . 2 = see Eq. and investment costs were 27%. For Year 2–10: Arithmetic growth G = (Qmax −Qﬁrst ) ÷ 2 thru Year 3 (Crumb productij (ton) × Operating labor expenseij ($/ton)) Total variable labor costs ($/h) × Labor hours3 ij (h/ton) ÷ Labor availability (%) (Price of materialij ($/ton) × Scrap tire delivered and processed into the materialij (%) × Scrap tire deliveredi (%) × Qin (tons/year)) (Scrap tire deliveredi (%) × Qin (tons/year) × Tipping feesi ($/ton)) Transportation cost ($/ton) × Qin (tons/year) (Crumb productij (ton) × Variable overhead expenseij ($/ton)) Variable overhead (%) × Operating labor expenses ($/ton) Note: i. The analysis showed a proﬁtable facility with an internal rate of return (IRR) of 19% and positive NPV of about $3 million for the assumed 10% opportunity cost of capital. the breakdown for combined ﬁxed and variable operating costs is shown in Figs. The baseline transportation cost is $8 a ton for an acquisition radius of less than 300 miles. ). After processing. .000. was 5 years to recover the initial investment. crumb rubber is assumed to be bagged in industry standard ‘super sacks’. along with their break-even points (at NPV = 0) are shown in a tornado diagram in Fig. including discounting effects. 1 = varies with mesh size and quantity. The packaging costs include the unit price of a super sack and pallet. (4) and (5). For levelized costs over the 10-year period. The payback period. 9. variable costs were 62% (reﬂecting their importance in proﬁtability).Table 3 Revenue and expense equations Revenues/Expenses Disposal costs ($/year) Electricity price1 ($/year) Maintenance expenses1 ($/year) Packaging expenses ($/year) Quantity of scrap tires (tons/year) Operating labor costs1 ($/year) Operating labor expenses1 ($/ton) Output revenues ($/year) Tipping fee revenues ($/year) Transportation costs ($/year) Variable overhead costs1 ($/year) Variable overhead expense1 ($/ton) Equations (Disposal fees ($/ton) × Waste (ton)) +IF the prices of materialij ≤ 0 ( (Disposal fees ($/ton) × Materialij (ton)) Electricity price ($/kW h) × (Crumb productij (ton) × Energy consumption2 ij (kW h/ton)) Maintenance costs ($/ton) × Qin (tons/year) Packaging costs ($/ton) × Crumb productj (ton) For Year 1: Qﬁrst = Quantity of scrap tires in ﬁrst year = 12. ﬁxed costs were 11%. 7 and 8. crumb sizes (1/4 . analyzed in the spreadsheet model over its 10-year study period. Variables which did not cross the breakeven threshold within this ±50% range included . The capacity of one super sack is 1 ton. The impact of quality variations was addressed in the scenario analysis. producer interviews that real prices would stay ﬂat (this was more optimistic than the slightly downward-trending real price projection that might be assumed from the historical data and is addressed in the alternate scenarios). Equipment costs and yields used data cited from state-of-the-art suppliers.
especially for tipping fees and labor costs) are highlighted by this analysis.1. yield (% change for all crumb sizes) and the total price escalation rate for crumb (% change for all crumb sizes). . These were Fig. The importance of market factors (for crumb prices) and facility location (regional competition for scrap tires and other local differentials. 8. etc. Relationships of cumulative numbers of cuts and selling prices to product sizes. energy and transportation costs. equipment selection and maintenance. 6.Fig. Operating costs in baseline scenario ($NPV). Scenario analysis Some of the complex issues faced by existing processors were cited earlier for market aspects of crumb quality and mesh size. 7.
Fig. exclusive sales of 3/8 . 10 or 20 mesh would not be proﬁtable). smaller mesh sizes have historically seen a greater drop in real prices. investment in a 30 mesh facility (as opposed to an 80-mesh facility) might appear to be a better choice.1. Also. and the base case assumption was for crumb sales distributed across sizes. but could also put downward pressure on tipping fees and increase transportation costs for obtaining tires outside the nominal acquisition territory. and 80 mesh). 9. production and sales exclusively for one size of crumb particle would still result in proﬁtability for the smaller mesh sizes (30. from 3/8 to 80 mesh.000 tons per . Under the baseline price assumptions. for example. In one scenario. Tornado diagram.1. if these sizes were not in demand.1. 6.2. would be proﬁtable under these larger-mesh-size demand scenarios. However. However. the facility barely broke even if tire availability was limited to 14. Scrap tire availability High competition for obtaining scrap tires could affect not only consistency of supply of raw materials. 40. 6. used to develop scenario analyses which might be useful for private and public investors. Variations in demand for speciﬁc mesh size and price ﬂuctuations The nominal facility could process mesh sizes down to 80 mesh. a 30-mesh facility. with its lower investment cost. Four of these scenarios are described below. Unless there is solid evidence of sustained markets for small size crumb demand.
and (2) due to higher competition to acquire the raw material.3. Perceptions of pricing.e.94 million. which had impacted their businesses.4. can perhaps provide a starting point for public and private ventures exploring this segment of the scrap tire recycling industry. In this scenario. and in general there are few standards for this growing industry. Analysis methodologies should model the impact of mesh size on production cost. there are considerable uncertainties which warrant careful analysis. tipping fees dropped by about 1/3.1. though still crude. the nominal facility (i. would be best used to promote the growth of end-user markets. Consider a scenario in which a new competitor in the nominal territory receives a subsidy equivalent to $22. and transportation distances exceeded about four times the nominal acquisition radius. both the crumb prices and quantities sold are 5% lower than the base case values. it appears to support the perceptions of many industry participants contacted during the research. State-subsidized competitors Some existing crumb producers perceived the entry of new state-subsidized competitors as a threat. quality. Gregorio .year. according to survey respondents and interviewees. 7. the nominal facility would be unproﬁtable. state subsidies of processors have been tried by several states. The underlying analysis methodology. 6. 6. and higher transportation costs should be noted. if appropriate at all. and mesh size requirements of end-user markets seem to vary considerably between processors. tipping fees and incoming scrap quantities are also 5% lower. pricing. and end-user markets. Assume that: (1) due to higher crumb supply in the territory. Lower yields and prices What if production yields are lower than the optimistic assessment of equipment manufacturers (60% instead of 69%) and prices for most mesh sizes decrease slightly in constant dollars. using time series forecasting based on historical patterns of the 1997–2001 years? In this scenario. Lanier (Lanny) Hickman. but the results have been mixed at best. and the Hickman Internship Program of the Solid Waste Association of North America (SWANA). In the past. with an NPV of −$1. They cited examples of subsidized facilities.7 million. lower tipping fees. often in a neighboring state but with overlapping end-user markets and acquisition areas.5 per ton. an unsubsidized plant) would see a decrease in NPV from $3 million to $0. While the analysis of the ‘nominal facility’ described above is based on a hypothetical and generalized case.1. While there are certainly opportunities for new-entrant competitors. Subsidy programs. with some of these processors failing within a few years. Conclusions Commercially sustainable facilities for processing crumb rubber from scrap tires require analysis of complex interactions between demand and production factors. quality. Acknowledgements The authors wish to particularly thank H. The correlation between less raw material availability.
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