Weibold! Academy: Success Factors – Getting Started in Tire Recycling

Dear Readers, Weiboold Academy Logo

This is the ninth article of our monthly blog series “Weibold! Academy”. As we have mentioned before, with these articles we try to provide our readers and our newsletter subscribers with valuable knowledge about the tire recycling industry. We believe that a good knowledge foundation might be beneficial for everyone involved in the industry and each month we cover different topics, thus providing you with important know-how for the tire recycling industry. Month by month we together dwell deeper into the world of tires and the ways of recycling them. In case you have missed our first seven W! Academy articles, you can find them here:

  1. Welcome to Weibold! Academy
  2. Weibold! Academy: Recycled Rubber Output Spectrum and Rubber Granulates
  3. Weibold! Academy: Rubber Granulates, Rubber Powder, Tire Derived Steel and Tire Derived Fiber
  4. Weibold! Academy: Tyre Recycling Value Chain
  5. Weibold! Academy: Applications for Tyre Recycling Plant Output
  6. Weibold! Academy: Rubber Granulate Applications
  7. Weibold! Academy: Rubber Powder Applications – Rubber Industry
  8. Weibold! Academy: Rubber Powder Applications – Surface Coatings

This month we begin dwelling into what it actually takes to succeed in the recycling industry.

Success Factors – Getting Started in Tire Recycling

Ensuring a Stable Supply

Recycling sites should be located in areas where there is an ample supply of used tires. Only a certain percentage of all collected tires are usable for recycling. Since the bulky tires are expensive to transport, the main supply should be collectable within a sensible radius of the facility. If collection capabilities are limited, the supply must be augmented by pre-shredded tires from collection agencies. Usually it is also required to become a certified recycler in order to be allowed collecting end-of-life tyres.

Financial Planning and Controlling Considerations

Rigid business planning is an important factor to success in the recycling business. Planning the material flow will ensure steady production. Cash management should be derived from the material flow projections and tightly monitored, especially in countries where payment cycles are greater than 60 days. Adequate maintenance provisions should be made for the equipment. Total maintenance costs are usually significantly higher than the manufacturer of the equipment advertises. One of the most important factors to be carefully planned at the beginning and closely monitored is the working capital requirement, especially during start up phases. When planning their operations, start-up too often fail to take into account that:

  • Payment cycles on the accounts receivables are longer than anticipated and adversely affect cash flow
  • Seasonal demand fluctuations can cause temporary high inventory levels straining cash reserves
  • Productivity levels are lower during low production cycles, affecting cash levels
  • Start-up learning curves can be longer due to necessary equipment adjustments, slower process optimization cycles, and initially hesitant customer acceptance.

If these factors are properly considered when planning the available capital for the first year of operation the company will have an excellent chance of succeeding. Start-up facilities should realistically plan a minimum of a 9 month ramp-up period. For production increases proper shift management should be considered to maximize use of the capital equipment. Since this is a CAPEX-intensive business proper financing in the form of low interest senior loans or sale and lease-back arrangements should be considered.

Understanding the Market and Its Needs

Every market and its dynamics are different. Prices vary and depend on the supply situation and whether the recyclers are getting paid a gate fee for taking tyres or not. The market for recycled products can be segmented as follows:

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It is recommended that start-ups and existing recycling facilities optimize and update their output to the local market conditions regularly. The choice of technology and process implementation must be derived for the granulate size and product with the highest initial sales potential.

Choice of Location

Considerations for the choice of location include:

  1. Access to a stable supply of used tires within a 200 km radius of the facility
  2. Access to main transportation routes
  3. Proximity to major customers
  4. Environmental feasibility
  5. Adequate storage facilities

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