Michael Blumenthal's presentation to the Tire & Rubber Association of Canada Rubber Recycling Symposium October 23, 2014

1. North American Ground Rubber Market
Michael Blumenthal
President, MarShay, Inc.
Tire & Rubber Association of Canada Rubber Recycling Symposium
October 23, 2014
Montreal, Quebec, Canada
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2. This Presentation Will….
Present information on the supply & demand for ground rubber in
Canada, the United States and Mexico
Present information on the current markets, mostly in the United
States
Suggest market trends and market forces impacting ground tire
rubber
Offer observations & conclusions
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3. Ground Rubber in Mexico
2 reported GTR production facilities
Based in the US/Mexico border region
Limited production
1 product manufacturer
Limited markets in Mexico
Focus is on border region due to abundant supply, desire to develop
infrastructure there and environmental issues related to tires
Possible exporting into the USA
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4. Scrap Tire Management in Mexico
Federal requirement that tire manufacturers devise/implement scrap tire plan
Manufacturers have scrap tire program in Nuevo Leon
Several Mexican states have developed their own management plan
Several states starting to develop their own plans
Limited markets
◦ Several cement kiln using TDF
◦ No rubber modified asphalt
◦ Mexican asphalt industry is aware of this technology and market conditions
are favorable
◦ No one is pushing/championing rubber modified asphalt
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5. Canadian Ground Rubber Production
18 reported ground rubber producers; Ontario has most of them
Provincial programs can dictate what the tires can be used for
Of the 34 million scrap tires generated, 25 million are processed into
GTR
Relatively large number of product manufacturers using ground
rubber
Ground rubber, mulch and finished products still being exported to
the USA
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7. Canadian Ground Rubber Marketplace
Supply & end use markets appear to be in balance
Provincial policies become a market force
◦ Mandates or restrictions impact markets
◦ Policies often reflected in cost of program
Not all provinces have the population needed to support a GTR
facility
◦ Smaller-scale operators have weak fundamentals
◦ Distance between tire source & processing facility impacts
efficiencies
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8. Ground Rubber Marketplace in the USA
Currently 48 ground rubber/mulch processors
11 companies control 75-80% of production & sales
GTR facilities not evenly spread across the country
Supply imbalance caused by imports from the EU has ended
1 facility recently went out of business
Several producer’s business dependent on state programs
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9. US Ground Rubber Markets
2009* 2011* 2013* 2014 estimates 2015 estimates
Sport Fields 520 MM lbs. 277 mm lbs. 225 mm lbs. 225 mm lbs. 225 mm lbs.
Asphalt 240 mm lbs. 220 mm lbs. 90 mm lbs. 90 mm lbs. 90-100 mm lbs.
Automotive 115 mm lbs. 60 mm lbs. 75 mm lbs. 50 mm lbs. 50 mm lbs.
Playground &
282 mm lbs. 230 mm lbs. 400 mm lbs. 400 mm lbs. 420-440 mm
Mulch
lbs.
Molded
Extruded
440 mm lbs. 373 mm lbs. 430 mm lbs. 450 mm lbs. 475 mm lbs.
Exported 115 mm lbs. 45 mm lbs. 80 mm lbs. 25 mm lbs. 25 mm lbs.
Total 1,702 mm lbs. 1,205 mm lbs. 1,300 mm lbs. 1,240 mm lbs. 1,285-1,315
mm lbs.
* Source: RMA
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11. Other Ground Rubber Sources in the US
Buffings
◦ A byproduct of the retreading industry
◦ Was the only source of ground rubber until 1992
◦ Relatively consistent supply of 200 – 220 mm pounds
◦ Imported buffings: difficult to estimate
Imports
◦ Significant imports from the EU: 2010-mid 2014: ended July 2014
◦ Accounted for approximately 100 million pounds a year
◦ Imports from Canada: estimated at 80 million pounds
Recycled GTR infill
◦ Some 20% of fields are rehabilitated annually
◦ Some rubber from old field is use: most is not & is landfilled
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12. Trends in the US GTR Marketplace
Rubber modified asphalt (RMA), automotive & exports are down considerably
Mulch/playground markets have improved since 2011
Molded/extruded product markets have improved over time
Supply has returned to pre-Genan levels
Prices for GTR in certain markets have returned to pre-Genan levels
Growth in sales is currently based on expanded sales into existing markets
Few new markets being developed
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13. Infill
About 1000 new fields a year; 800 new 200 rehabilitated
Some used infill being and reused in field
Old GTR not reused in field not current competition for new supply:
this could change
Number of fields not increasing
Commodity pricing: non-elastic pricing
Still subject to concerns on human & environmental health concerns
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14. Mulch
Becoming more accepted in the marketplace
Sale through big box stores a double edged sword
◦ Good distribution and exposure
◦ Downward pressure on pricing
Wet spring caused slow start & impacted 2014 sales
Not as sensitive to environmental issues as infill or playground cover
Not accepted everywhere: strong regional market
Moving towards commodity status
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15. Playground Cover
Becoming more accepted in the marketplace
Limited number of producers
Consistent quality must be maintained
Wet spring caused slow start & impacted 2014 sales
Sensitive to environmental concerns
Moving towards commodity status
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16. Molded & Extruded Products
Increased/increasing use
Series of factors contributed to growth
Potential to expand
Few, if any, environmental concerns
Focus of new sales: smaller sized GTR
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17. Automotive & Export
Mostly finer sized GTR
Sales impacted by changes in tire manufacturing industry
◦ GTR used in less expensive, lower mileage tires;
◦ Imported tires from China targeting this market niche
◦ Chinese manufacturers not using US GTR
Only a few companies in the US are selling to tire and auto
manufacturers
More sales to auto industry from Canadian companies
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18. Rubber Modified Asphalt
30% reduction since 2012
The issue is not GTR or rubber modified asphalt itself: GTR less
expensive than other modifiers
Congress passed a continuous resolution for funding the
Transportation bill until May 31, 2015
The issue at hand is reduced paving due to continue budget
restrictions: e.g. Texas reduced paving budget by $5 billion
DOTs/DPWs going with traditional paving technologies
◦ Dealing with the asphalt & concrete industries
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19. Modified Asphalt: Positive Factors
Warm mix asphalt obtaining “performance grade” (PG) classification
DOTs comfortable with PG grades (hot mix asphalt is not PG graded)
Use of GTR in terminal blends continuing to expand
Best of quiet road surfacing: some potential for increased use
FHWA funding update of guidelines for use of RMA
Several new or unexpected states increasing use of RMA
◦ New Jersey, Georgia, Massachusetts, New Hampshire
◦ New, but limited market potential
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20. Asphalt Rubber: Negative Factors
Few states supporting RMA through grants or research (MI & CA)
Drop in oil price likely to lower asphalt price
RMA is a commodity market: no premium paid for better quality GTR
End users are always looking for lower prices
Prices are inelastic
Reduced staff at DOTs & increasing competition from competing
materials limits access & appeal of GTR
Other markets for scrap tires
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States using TDF

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Composite map of states using
rubber modified asphalt and/or
TDF + imports from Canada

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25. Market Realities
Opponents of tire-derived products not going away
Environmental issues will always be a concern
◦ One bad experience could disrupt a market (NBC News & infill)
Ground rubber markets are developing at uneven rate
Global & other industry issues impacting some GTR markets
Predominance of TDF a factor in expanding asphalt markets
Marketplace relying on established markets
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26. Observations in the US GTR Marketplace
All major end uses have evolved into commodity markets
Positive & negative aspects to commodity pricing
Positive: an accepted material w/industry standards;
Negative: little/no price variation; no premium for higher
quality; companies likely to produce material meeting
minimum standards; buyers still jump to lower priced
material
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27. Observations in the US GTR Marketplace
Unlike certain Canadian provincial programs, GTR markets generally
do not provide sufficient demand for all tires in any given state
◦ 1 exception (Arizona)
TDF markets are expanding & often compete w/GTR for supply
Good news is that TDF is taking up slack in supply of tires
Bad news is that TDF is taking up the slack in the supply in tires
Some states have none-of-the-above
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28. Outlook for US GTR Marketplace
Overall 2014 sales likely to be slightly lower than 2013
Rubber modified asphalt still languishing
Infill & playground could increase slightly
◦ A drier 2015 spring will be beneficial
Molded/extruded products using GTR likely to increase
Export & Automotive down due to changes in tire & auto manufacturing
Continued imports from Canada & possible GTR from renovated fields
likely to impact localized markets
Pricing is stronger but unlikely to increase due to a series of factors
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29. Conclusions & Recommendations
Start to develop new end use markets
Focus on improving production efficiencies
Focus on a consistent quality product
Update the ASTM Standards for definitions and testing
Coordinate standards with the EU (CEN)
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30. Thank you for your time & attention
Contact information:
Michael Blumenthal
President, MarShay, Inc.
marshayinc@gmail.com
Scraptireexpert.com
845 642 3130
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