Exports produce scrap tire shortage
A shortage of scrap tires that drastically reduced tipping fees collected by recyclers in some regions of the country has eased as China tightened its import restrictions, but observers say it could resume at any time and impose significant hardships for many recyclers in hard-hit areas.
Scrap automobile and truck tires are recycled for a variety of end uses, from being burned for fuel to power cement kilns and electric generation plans to being ground up for use in roadway paving and running tracks. The supply of scrap tires is normally stable, with the U.S. vehicle fleet generating approximately 300 million tires per year due to replacement and retirement.
But around the beginning of 2011, that changed. Exports of baled scrap tires to Vietnam surged powerfully and stayed well ahead of normal levels for about 18 months. During this period Vietnam was importing tires at a rate of about 20 million annually, according to Michael Blumenthal, vice president of the Rubber Manufacturers Association, a Washington, D.C., industry group representing tire makers.
The baled tires sent to Vietnam were ultimately headed to China, Blumenthal said. There, they were primarily burned for energy generation. China officially bans importation of scrap tires, but because the tires were in demand for the country’s industries, it looked the other way at tires entering from Vietnam, he stated.
The tires shipped to Vietnam represented about eight percent of the scrap tires processed annually in the U.S., Blumenthal said. However, the effect of the diversion of tires was concentrated in three areas, including ports in California, Florida and New York/New Jersey. In these areas, recyclers faced significant shortages of tires.
The result of the shortages was that recyclers reduced the tipping fees they normally charged tire retailers, body shops and other sources of scrap tires. In some cases, tipping fees, which represent a major source of income for recyclers, were depressed more than 50 percent, Blumenthal said.
Recyclers pointed the finger of blame for the situation at what they described as unlicensed operators. Blumenthal said most of the organizations doing the collecting, baling, storage and shipments of the scrap tires exported to Vietnam weren’t properly licensed to do so. Licensed recyclers have been calling on state regulators to enforce permitting and licensing requirements in an effort to control the traffic, he said.
The effects of the tire export surge on products made from scrap tires have been modest, according to Blumenthal. Low-value uses, such as cement kilns that burned tires for energy, have seen the biggest reduction in scrap tire availability. Higher-value uses, such as crumb rubber, however, have been able to maintain their supplies, he said.
Recyclers have likely not seen the last of the export-induced tire shortage. That’s because the end of the export surge in July 2012 was largely caused by international tensions between China and other Southeast Asian countries including Vietnam that have prompted China to ratchet up enforcement of its tire import ban. In fact, said Blumenthal, “They have banned tires from Vietnam. About two months ago, the import of tires from Vietnam came to a sudden end. It went from about 20 million tires per year down to about zero.”
The source of the tension is conflicting claims over islands in the oil-rich South China Sea, with China declaring it owns islands that other countries consider theirs. While the tension is high now, it may well abate as the disputes are resolved, at which point Blumenthal thinks it is likely China will again permit imports of scrap tires from Vietnam. If and when that happens, he said, U.S. scrap tire exports to Vietnam are likely to mushroom once again.
The effects on recyclers if that happens again may be somewhat diminished if they succeed in getting states to more tightly regulate collectors, balers and shippers of export scrap tires. Blumenthal said recyclers and associations in the most-affected areas of California, Florida, New York and New Jersey are working with regulators to make them aware of the issue and educating them about identifying unlicensed operators.
Recyclers are also working proactively to improve their sources of supply so that, even if Vietnamese exports pick up again, they won’t have to drastically discount tipping fees in order to obtain sufficient tires to operate economically. This effort is complicated by the fact that most of the scrap sources involved in the exports were smaller operators, according to Blumenthal.
It’s naturally harder to negotiate long-term contracts with a lot of small shops than with a few national chains of tire stores and auto repair centers. However, he said that, since many of the companies doing the collecting of scrap tires for export have ceased operations since the Vietnam market dried up, scrap tire sources that formerly dealt with them are looking for more reliable places to dispose of their scrap tires.
Otherwise, since July or so, it’s generally back to business as usual for scrap tire recyclers across the United States including those previously affected by the export-induced shortage. However, Blumenthal warned, tire recyclers should realize that the shortage is likely to return once international tensions ease and China begins accepting tire imports from Vietnam again. That’s why now is no time to ease up on pressure to improve regulation.
“The export market is a legitimate market with no restrictions on it,” Blumenthal said. “The problem is that the companies that invested in the scrap tire business and have permits and have developed markets are suffering because of this market anomaly.”
His solution, rather than trying to keep Vietnam or China from buying U.S. scrap export, is to keep unlicensed operators from selling it to them. “We can’t say you can’t export tires,” he said. “What we can say is, if you’re going to be in the game you have to play by the rules, be permitted and have the licenses. That’s where we’re focusing our efforts.”