Scrap tires to crumb rubber: feasibility analysis for processing facilities

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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1994. etc.) tire-derived fuel (TDF). As a result. also known as ground rubber. have also experienced growth (Fig.007 ). in which tires are shredded for applications such as leachate collection in landfills and for highway embankments. 1999a.039 ). Markets for asphalt modifications and molded products each accounted for about 30% of crumb rubber usage in 2001. 1998RRI. 1. but our best—but still rough— estimate would be that recent demand has been about 14% for coarse sizes.006 –0. 2). Liaskos. 1999). Crumb rubber is described or measured by mesh or inch. 1998RRI. automotive products. 52% for mid-range sizes. Crumb sizes can be classified into four groups.079 –0. RRI. only about 2% of scrap tires generated in the U. sources for above estimates cited in caption). were reprocessed as crumb rubber. Klingensmith et al.003 ). principally for use as a supplemental fuel in cement kilns (probably about 33% of total scrap tires generated). which are: (1) large or coarse (3/8 and 1/4 ). and (4) superfine (100–200 mesh or 0. 22% for fine sizes. The third major reuse application was crumb rubber. (2) mid-range (10–30 mesh or 0. Estimations within the . 2001Serumgard 1998.016 –0. Aggregate market data in the crumb industry is scarce. 1998. in terms of both production and markets. it appears to be difficult to generalize particle size requirements in each crumb market. CWC. This appears to be one source of difficulty for crumb producers when attempting to forecast market demand and production planning.g. and 12% for superfine sizes. In 1994. 2000RRI.b. Other markets for sports surfacing. animal bedding.S. Of all scrap tire reuse options. Scrap tire utilization alternatives. Particle size and particle size distribution requirements of crumb rubber depend on the crumb end user (Baranwal and Klingensmith. Civil engineering applications.. 2002. Higley. 1996. but by 2001 this had jumped to about 12% (Fig.Fig. (Sources: Blumenthal and Serumgard. A more comprehensive discussion of scrap tire markets can be found in Sungthonpagasit and Hickman (2002). and is generally defined as rubber that is reduced to a particle size of 3/8-in or less. 1. crumb rubber is probably the most complex but least studied. (3) fine (40–80 mesh or 0. accounted for about 15% of scrap tires. molded products) may require different crumb sizes to produce their unique products. Different producers in the same crumb market (e.

1998RRI. due to price competitiveness with virgin rubber products. recycled crumb rubber should be stored in a cool and dry place. purchase quantity. importers. and 100 mesh. and molded products.1%). most significantly for 40. Crumb rubber markets (million pounds): North America. especially in molded rubber and composite products. as well as price ranges for 2001. and negotiations between producers and end-users. 80.5% of total weight). In general. mats. 2002. currently there are few quality standards for vendors and customers. and high consistency. Fig. 3 shows data published for 1996–2002 for national average prices per ton for different sizes of crumb rubber. low metal content (less than 0. a ‘high quality of crumb’ means low fiber content (less than 0. Definitions of quality appear to be quite diverse and driven by customer specifications unique to different market segments.Fig. An accepted maximum level of moisture content is typically about 1% by weight. competitive pricing factors. (Sources: RRI. A perception among many established producers is that new-entrant competitors. turf. some other producers stated that the fine size has the highest potential usage. 3/8 . In contrast. highly regional pricing situation affected by crumb quality. therefore. The sparse published data for national price averages provide only an incomplete picture of a complex. It would appear that real-dollar prices dropped somewhat across most crumb sizes. playground materials. 2. Excess moisture content limits the crumb uses in many applications. Although a focus on ‘quality’ is described by many as critical to succeeding in the crumb business.) different market segments of future crumb market growth are contradictory. 2001RRI. Crumb average prices and price ranges (low-high) in 2001 (shown in Fig. Discussions and a review of literature suggested that 1/4 —20 mesh has the most potential growth for the near future for sports. crumb coloration. . impact of subsidies. 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. and 200 mesh. 3) indicate that the greatest variation in prices has been for 1/4 . especially in molded and extrusion markets. Excess heat during processing can degrade the rubber.

Fig. The lack of standards for processing crumb is clearly a barrier to the maturation of a market for recycled crumb as a commodity material. white color cannot be seen. 1996. Coloration and fiber content specifications appear to influence producer decisions about separate vs. mixed processing of passenger and truck tires. Crumb rubber average prices (current $/ton). it seems to be very important to specific markets. 2. however. . 1999RRI. For example. 1997). recycled crumb can deteriorate rubber compound properties in a new tire by reducing tire durability and longevity leading to increased tire replacement frequency (Phillips. and 200 mesh is incomplete for 1995. Some producers prefer to process only truck tires due to lower textile cord content. Blumenthal et al. Some molded market end-users may require all black crumb for their unique products. 3.. Acquisition of incoming scrap tires Before investing time and money in crumb rubber production. which they claim results in higher price and demand (Capelle. Everyone has his/her own unique system to produce crumb rubber. while for some other molded products there are no preferences. 2002) (Note: Market data for 80. 1996. the quality of recycled rubber is in general lower than virgin (natural and synthetic rubber) products. RRI. Document Undated). One producer processed truck tires separately from passenger tires only when getting special orders from customers who require all black crumb. and quality varies from operation to operation. producers must consider strategies for obtaining scrap tires in their acquisition territory with effective tipping fees.) Coloration appears to be less of a concern than other issues. (Sources: RRI. Moreover. Another producer claimed that coloration is not important because after grinding crumb to a small size. 100. 2001RRI.

including scrap tire types (tires containing rims and bias/radial tires). 1990. septic applications have been approved and used for 10 years in South Carolina. treated plywood roof sheathing is produced by applying a latex emulsion with 20 mesh rubber to one side of plywood. as well as increased transportation costs for a wider acquisition territory. market demand for scrap tires. 2002). An EPA-sponsored . There is no evidence that tire shreds increase the concentration of metals of concern in meeting a ‘primary’ drinking water standard (DWS). The future of markets that use larger-sized shredded tire pieces. 5 years in Virginia. regional conditions. For example. waterproofing. they appear to pose no significant. 1997). 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. which are effectively a ‘negative cost’ for raw materials. 2000). defray operating expenses and impact the producer’s ability to keep crumb selling price competitive with other scrap processors and their virgin counterparts. there appear to be many other potentially promising market niches which may have future impact. affecting ‘secondary’ DWS (Blumenthal. High competition to obtain the raw materials may cause a downward pressure on tipping fees (New York Roundtable. 3.Fees. 1997. Questions are often asked about potential market impact of known and potential environmental risks associated with scrap tire materials.5 microns) and particle-bound polycyclic aromatic hydrocarbons (PAHs). Fees increased on average by about 32% for passenger tires and 25% for truck tires during 1993–2001 period (RRI. Currently. known health or environmental risks. and approval in Delaware is pending. For example. 1999a. A latex emulsion serves as a vapor barrier. 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. and anti-skid surface that decreases the accident rates caused by slipping (CIWMB. especially septic system liners. which he anticipates as an important future market. which is then cured at ambient temperature. Another environmental consideration that could impact crumb markets specifically is potential worker exposure to fine respirable particles (<2. 1997). transportation costs. 2 years in Pennsylvania. 2. Blumenthal and Serumgard. 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. 1999). As long as tire shreds are placed above the water table. could also impact scrap tire availability for crumb production. The most cited concerns probably relate to civil engineering applications and the effect of tire materials on water quality. New York Roundtable. which are less costly to process than smaller-sized crumb. the use of scrap tire derived material (STDM) for civil engineering applications (CEA) has primarily been driven by state initiatives. 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. Kearney. However. Engineering markets and environmental concerns Aside from the market segments shown in Fig. and state and local environmental regulations. the steel belts exposed at the cut edges of the tire shreds may increase the levels of iron and manganese. 2000).

Nominal ambient grinding process. 1998). however. To establish a baseline for this study. it is difficult to define hard-and-fast criteria for the engineering economics of crumb rubber. a nominal production process was synthesized from site visits with producers and a review of the published literature. mesh sizes and quality. Production process Due to the heterogeneous mix of end-user markets. Fig. 4 shows a nominal ambient grinding process that can produce high quality crumb rubber ranging in size from 3/8 to 80 mesh. chrysene and methylated derivatives of both’ (Watts et al. 4.. but industrial hygiene and worker liability might be potential future cost issues that bear watching. . Ambient grinding (as opposed to cryogenic grinding) is the production process used by the majority of crumb producers. This nominal Fig. and production configurations. 4. No references were found for similar monitoring studies for workers at fine mesh-size crumb production facilities.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.

2. Visual inspection and sorting is an important first step to ensure that the scrap tires are suitable for processing. the surface modification market requires small-size crumb with high quality while the animal application market requires a larger-size crumb with lower quality. 2000). 4. 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. Moreover. 6% for the granulating process. the type of tire collected (e.e. tires containing rims are de-rimmed.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. mid-range. Some of the comments from producer interviews and the literature review are summarized below. Passenger tires and truck tires are separated. The tires are re-introduced to the tire conveying system to reduce the whole tires thru shredding and granulating down to various sizes. Producers stressed in their interviews that sustained throughput yields are lower and maintenance requirements higher than the optimistic assessment of equipment manufacturers. the rubber waste (i.1% metal. 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.9% metal-free products can be either: (1) marketed as-is for numerous applications. Maintenance costs can reportedly be higher in practice than the costs claimed by equipment manufacturers by up to 200–300%. and requires . The rims are combined with the metal stream (tire wire) from the tire recycling process. quality. and fine size). truck tire) not only has an impact on tipping fees. One rather obvious rule-of-thumb is that production cost and selling price are a function of crumb size (see Fig. The powder process can reduce the mid-range crumb sizes to 40–80 mesh crumb containing 5% fiber with 0. For example. and auxiliary equipment required for the nominal facility. the higher the investment and operating costs. Worn equipment can reduce processing capacity and production rate. or (2) further reduced to smaller sizes. Mesh sizes of 3/8 with 95% metal-free products and 5–30 mesh with 90% fiber and 99. 4.g. classified into three groups (coarse. There are many types of size-reduction equipment for scrap tires. 3). After passing through each process. but also on process costs. The smaller the crumb size. Capital investment Market analysis and its implications for product and process specifications and capacity planning are critical for investment decisions. rolling stock. and 4% for the powder process. passenger vs. and metal and fiber fragments removed at various stages of the process are conveyed to central containers for later sale or disposal. A magnetic metal removal and fiber screening system are incorporated. Operation and maintenance (O&M) O&M costs relate to processing equipment. and coloration. still attached to metal or fiber scrap) is found to be 8% for the shredding process. increase particle size fraction. end-product yields.1.

the relative percentages of the recyclable materials will change. the rubber is expected to lose as much as 20–40% of material by magnetic separation systems (Astafan. granulating and powder process). the removed beads contain too much attached recyclable rubber causing poor quality scrap metal and lower recycled rubber yields. such as shredder knives. 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%. One producer claimed that his shredder machine processes 10 tons per hour when the knife is new. RMA. For example. and other variable costs are largely a function of the product mesh size. In general. 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.5%) and much more metal (15%) (Dufton. After passing through each process (shredding. not including labor and other significant costs. Capelle claimed that shredder knives have to be replaced after 60. 1999.5% rubber compound. 5). such as working experience. After processing. 2000). 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. Product yields One scrap Passenger Tire Equivalent (PTE) = 20 lbs. depending upon the sizes of crumb (Gray. This was somewhat lower than yields cited by some manufacturers of state-of-the-art size reduction equipment (Fig. 6.000 car tires or 10.000.. TNRCC. In general. 2001. 1996).3. 1987. 1995. Generally.3 a ton.000 truck tires while toothed rolls in the ambient grinding process have to be recoated after processing about 1500–2000 tires (Capelle. 2001). are generally shorter than those projected by the manufacturers. which affects crumb rubber end-product yields. processing types and separating systems.000 tires is about $10. scrap passenger tires have more fiber (4%) and less metal (10%) as opposed to truck tires that have almost no fiber (<0. or 5 cents a tire. and before processing each PTE contains on average 86. Also. Some rubber particles remain attached to steel fragments. but only 5 tons per hour when near the end of the knife’s life. With poorly maintained debeading equipment. energy. at the 1×1 in particle size. A general observation in crumb production is that finer particle sizes have greater surface area and cleaner crumb rubber.4 a ton and labor costs are about $11. One crumb producer claimed that tooling and expendable material costs are about $27. Producers and some industry references stated that about 50–60% of a scrap passenger tire can be processed as crumb rubber. a magnetic system is used to remove steel fragments. The front-end of processing is the most labor-intensive and significantly affects downstream operations. The method used to calculate the product yields for each process step is shown in Fig. MES. 1997). Hershey et al. 4. but require longer processing time and hence more power and labor. 2000. labor. oils. the relative . quality and quantity. Service lives of perishable items. and pigments) while one scrap truck tire (nominally 100 lbs) contains 84.a lot of money for rebuilding (Capelle. 2001. One chip producer stated that the cost for replacing knives after 200. 1997).0% rubber compound (including chemicals. RMA. The change depends on many factors. UNEP. Most producers separate passenger and truck tires due to different fiber and steel compositions which affect end-product quality and coloration.

and 0. 0. percentages of end-product compositions will change. If the total weight of an incoming batch of scrap passenger tires is 1 ton.068 tons of rubber waste. the 3/8 crumb mesh size is an optional product.83 tons of rubber compound. As this nominal process is flexible in output sizes and percentages. Crumb rubber plant cost model.095 tons of metal. 5.Fig. If X% of 1 Ton PTE is removed after the shredding process. . only (1 − X% − Y%) × 1 Ton of crumb rubber is available. only (1 − X%) × 1 Ton of raw materials is next transported to the granulator process. then the output after the shredding process will contain 0. 4) assumes that after passing through the shredder. and the percentages can be varied. At the final stage of the process. 95% of metal is removed and 6% residual rubber is lost. The nominal process (shown in Fig.

Transportation Typically. 6. 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. sizes of scrap tires. 4. recyclers need to be near the raw material to decrease transportation costs and guarantee procurement. PTE end-product yields. including truck size. fuel costs.Fig. Hauling costs depend on many factors.4. and distances from recyclers to collectors. labor costs. A 1993 EPA report indicated that transportation charges for whole tires averaged 15–20 cents per ton-mile if hauled within .

. As a simplified approximation. 1993). 1987TNRCC and TXDOT. 2001). different crumb size capabilities (3/8 up to 80 mesh). This may affect consistency of scrap tire supply. It should be noted that much of the underlying financial and engineering data in this model have been reviewed by several industry experts. A baseline scenario.. and different market crumb price and size requirements. 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. variations and assumptions were developed. and increase transportation costs required to obtain raw materials outside of the immediate acquisition territory. there is a high competition to obtain the scrap tires. see Bearman et al. the relationship between mesh size and some types of variable costs (e. Since three slices through a cube with side length L are required to cut it into 8 smaller cubes. however. and the higher the selling prices. (1) The more the number of cuts. using data collection. sources of pre-shredded scrap tires can reduce transportation cost by 30–60% (USEPA. energy. etc.e.. etc. A decomposition of cost and revenue sources is shown in Fig. for example. the total number of cuts required to reduce the original cube to smaller cubes with side length S is.an 100-mile radius. the more the energy and labor consumption. A discounted cash flow model of a rubber reprocessing facility was created as a means to help analyze different market and production scenarios. 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. Table 1 shows industry estimates for a 15.g. 1987). but obviously ignores complications due to stress theory. 5. but they are nonetheless a subjective amalgamation of different sources. The model was created to be able to examine different processing capacities (up to 15. particularly those encouraged and supported by state governments. different sources of scrap tires (truck and car tires). different machine specifications (% yields of end product). The rest of this paper explores aspects of the engineering economics of crumb processing.000 tons a year). 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. In some developed regions. 5. decrease tipping fees. This crude approximation seemed reasonably consistent with.000 tons/year production facility that can process crumb mesh sizes down to 80-mesh.) for each mesh size. mass-specific breakage energy on particle size. Number of cuts = 3(L/S − 1). energy usage and processing rate data for size-reducing equipment. and types of cutting materials (crushing resistance of the roll and knife strength. using the data gathered from processors and public sources. variable cost per ton for labor. crack propagation in particles. interviews. energy) roughly follows the number of ‘cuts’ required to reduce a cubic volume of raw material to its final particle size. and surveys of crumb rubber producers and crumb rubber end-users. Variable costs are calculated using weight as the cost driver (i. the longer the processing time. (1991)). document reviews.

The power sizing technique assumes that cost (C) varies as some power of change in size or capacity (S).85 85. Note: All costs are varied with general inflation over the 10-year study period. CA /CB = (SA /SB )X Some examples of estimation equations for energy and labor were Energy consumptionPTE (kW h/ton) = 97.05 0.5 × Crumb size (inch)−0. The power sizing equation is shown below where X is a cost-capacity factor.60 2.80 0.222 Energy consumptionTruck (kW h/ton) = 103.19 2.91 × Crumb size (inch)−0.15 0.00 0. Where possible.00 269.23 8.00 Sources: Dexter (2002). 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. USDE (1999) and USDL (2002).00 0.00 14.00 25.10 27.211 Labor hoursPTE (h/ton) = 0.27 × Crumb size (inch)−0.0319 Labor hoursTruck (h/ton) = 0.00 13.0212 (2) (3) (4) (5) (6) . Misc office expense.00 52.28 × Crumb size (inch) −0.39 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. 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.

The quantity of scrap tires in the first year is assumed to be 12. The minimum attractive rate of return (MARR) is assumed to be 10% (including inflation) while the marginal tax rate is 45%. 6 X = 9% See Fig.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. 6.S. Other considerations such as zoning regulations and permits. The baseline scenario assumes incoming tonnage is 50% from passenger tires and 50% from truck tires. A simplified 10-year straight-line depreciation is assumed for the plant equipment and rolling stock investments. The nominal scrap facility is assumed to be located in the U. Mid-Atlantic region. A = 33% See Fig. Z = 27%. The study period is 10 years.S. and (2) product revenues. and crumb products and the percentage of scrap tire delivered and processed to various products are shown in Table 2. state regulations. which include: (a) sales of recycled crumb rubber.55 155. 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%. Y = 64%.For the baseline scenario. tipping fees. disposal costs must be assumed. fibers. Prices in yr 0 ($/ton) 115. 6. (b) sales of scrap metals. C = 33% See Fig. and the defined market area and sources of scrap tires for the nominal facility is the Atlantic seaboard (Table 2). (c) sales of scrap fiber. Z = 27%. a production ramp-up of three years was assumed to gain process familiarity and obtain market share.000 tons) by the end of Year 3. 6. are truck tires (average 100 lbs each) and 84% are passenger tires (average 20 lbs each). Other equations to calculate revenues and costs are described in Table 3. worker safety. Roughly 16% of the number of scrap tires generated in the U. 6. B = 33% See Fig. one for passenger tires and the other for truck tires. The nominal process consists of two shifts. Only equity financing is assumed as is typical for this type of preliminary feasibility analysis. Y = 64%. Y = 64%. with zero salvage value. The baseline prices of scrap metals. and environmental regulations are not addressed. Revenues for the scrap tire recycling facility come from two sources: (1) tipping fees. 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. This seems a reasonable assumption. When market prices for scrap steel or fiber drop to zero (as in the baseline scenario). 6 See Fig. E = 20% Same as PTE . One uncertainty factor for product revenues is the price of scrap metal and fiber. 6. 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). 6 See Fig. D = 80% See Fig.000 tons with arithmetic growth to plant capacity (15. consistent with some of the crumb producers interviewed.

. variable costs were 62% (reflecting their importance in profitability). assumes crumb prices and tipping fees both increase with 3% general inflation. Financial feasibility of facilities The base case. For levelized costs over the 10-year period. 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). ). and investment costs were 27%. 2 = see Eq. Sixty-three percent of annual revenues came from crumb rubber sales and 37% from tipping fees. including discounting effects. was 5 years to recover the initial investment. The packaging costs include the unit price of a super sack and pallet. and . Excluding amortized investment and financing. The analysis showed a profitable facility with an internal rate of return (IRR) of 19% and positive NPV of about $3 million for the assumed 10% opportunity cost of capital. The capacity of one super sack is 1 ton. 9. fixed costs were 11%. The impact of quality variations was addressed in the scenario analysis. For Year 2–10: Arithmetic growth G = (Qmax −Qfirst ) ÷ 2 thru Year 3 (Crumb productij (ton) × Operating labor expenseij ($/ton)) Total variable labor costs ($/h) × Labor hours3 (h/ton) ÷ Labor ij availability (%) (Price of materialij ($/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. 20 mesh. j. Variables which did not cross the breakeven threshold within this ±50% range included . along with their break-even points (at NPV = 0) are shown in a tornado diagram in Fig. scrap tire types (PTEs and truck tires). 6. The effects of ± 50% changes in the nominal values for the most sensitive variables. The payback period. Equipment costs and yields used data cited from state-of-the-art suppliers. The baseline transportation cost is $8 a ton for an acquisition radius of less than 300 miles. 3 = see Eqs.Table 3 Revenue and expense equations Revenues/Expenses Disposal costs ($/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 ($/kW h) × (Crumb productij (ton) × Energy consumption2 (kW h/ton)) ij Maintenance costs ($/ton) × Qin (tons/year) Packaging costs ($/ton) × Crumb productj (ton) For Year 1: Qfirst = Quantity of scrap tires in first year = 12. crumb rubber is assumed to be bagged in industry standard ‘super sacks’. (2) and 3. 1 = varies with mesh size and quantity. After processing. . (4) and (5). 10 mesh.000. analyzed in the spreadsheet model over its 10-year study period. crumb sizes (1/4 . 7 and 8. the breakdown for combined fixed and variable operating costs is shown in Figs.

.1. The importance of market factors (for crumb prices) and facility location (regional competition for scrap tires and other local differentials. yield (% change for all crumb sizes) and the total price escalation rate for crumb (% change for all crumb sizes). Relationships of cumulative numbers of cuts and selling prices to product sizes. especially for tipping fees and labor costs) are highlighted by this analysis. energy and transportation costs. equipment selection and maintenance. Operating costs in baseline scenario ($NPV). etc.Fig. These were Fig. 7. 8. 6. Scenario analysis Some of the complex issues faced by existing processors were cited earlier for market aspects of crumb quality and mesh size.

Also. Variations in demand for specific mesh size and price fluctuations The nominal facility could process mesh sizes down to 80 mesh. and 80 mesh). but could also put downward pressure on tipping fees and increase transportation costs for obtaining tires outside the nominal acquisition territory. Four of these scenarios are described below. a 30-mesh facility.1. the facility barely broke even if tire availability was limited to 14. from 3/8 to 80 mesh. 9.2. 6. In one scenario. would be profitable under these larger-mesh-size demand scenarios.Fig. production and sales exclusively for one size of crumb particle would still result in profitability for the smaller mesh sizes (30. used to develop scenario analyses which might be useful for private and public investors. However. Unless there is solid evidence of sustained markets for small size crumb demand. exclusive sales of 3/8 .1.1. Scrap tire availability High competition for obtaining scrap tires could affect not only consistency of supply of raw materials. if these sizes were not in demand. However.000 tons per . 10 or 20 mesh would not be profitable). and the base case assumption was for crumb sales distributed across sizes. for example. 6. Under the baseline price assumptions. Tornado diagram. 40. 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. with its lower investment cost.

The underlying analysis methodology.5 per ton. an unsubsidized plant) would see a decrease in NPV from $3 million to $0.1. They cited examples of subsidized facilities.3. would be best used to promote the growth of end-user markets. and in general there are few standards for this growing industry. While there are certainly opportunities for new-entrant competitors. quality. Analysis methodologies should model the impact of mesh size on production cost. and higher transportation costs should be noted. often in a neighboring state but with overlapping end-user markets and acquisition areas. State-subsidized competitors Some existing crumb producers perceived the entry of new state-subsidized competitors as a threat. Gregorio . according to survey respondents and interviewees. though still crude. The correlation between less raw material availability.94 million. can perhaps provide a starting point for public and private ventures exploring this segment of the scrap tire recycling industry. state subsidies of processors have been tried by several states. In the past. Subsidy programs. with an NPV of −$1.7 million. Assume that: (1) due to higher crumb supply in the territory.e. Lanier (Lanny) Hickman. Acknowledgements The authors wish to particularly thank H. both the crumb prices and quantities sold are 5% lower than the base case values.year. the nominal facility would be unprofitable. with some of these processors failing within a few years. if appropriate at all. 6. it appears to support the perceptions of many industry participants contacted during the research. tipping fees and incoming scrap quantities are also 5% lower.1. Consider a scenario in which a new competitor in the nominal territory receives a subsidy equivalent to $22. and mesh size requirements of end-user markets seem to vary considerably between processors. but the results have been mixed at best. Perceptions of pricing.4. and end-user markets. 6. quality. using time series forecasting based on historical patterns of the 1997–2001 years? In this scenario. lower tipping fees. 7. 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. and transportation distances exceeded about four times the nominal acquisition radius. and the Hickman Internship Program of the Solid Waste Association of North America (SWANA). Conclusions Commercially sustainable facilities for processing crumb rubber from scrap tires require analysis of complex interactions between demand and production factors. there are considerable uncertainties which warrant careful analysis. In this scenario. pricing. which had impacted their businesses. the nominal facility (i. and (2) due to higher competition to acquire the raw material. While the analysis of the ‘nominal facility’ described above is based on a hypothetical and generalized case. tipping fees dropped by about 1/3.

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