Recycling law puts brakes on tire makers' profit

Manufacturers and importers to form recycling company Tire makers and importers will have to finance the collection and recycling of some 20,000 tonnes of tires this year following the implementation of Poland's new recycling legislation. "Twenty-thousand tonnes is a lot and the collection costs will be comparable to those of tire distribution," said Tomasz Bednarczyk, in charge of recycling at Michelin Polska. The law, which took effect Jan. 1, requires tire manufacturers and importers to collect and recycle 25% of the volume of tires they sell this year. The percentage will gradually climb to 75% by 2007, boosting costs across the industry. "It will have an impact on manufacturers and importers but it's too early now to estimate by how much," said Emmanuel Ladent, director general of Michelin Polska. "In the end, it will also have an impact on consumer prices." To accommodate the law, Poland's biggest tire makers and importers are working on launching a joint-stock company called Organizacja Odzysku that will organize and coordinate collection and recycling of old tires, according to Bednarczyk, who represents Michelin Polska in the project. "We expect the company to be formed within the next two or three months," he said. Burning rubber Cement plants, which could use tires as an alternative fuel, tire collectors and rubber recyclers are all hoping to reap earnings from the new legislation, which creates a guaranteed, untapped market with growth potential. Michelin is also holding talks with cement manufacturers and tire recyclers on further processing of tire waste. "Tires, as an alternative fuel, can partly replace coal at cement plants," Bednarczyk said. "The cost (for cement plants) is lower than in the case of coal, because they would only have to pay the transport costs." But Andrzej Ochocimski, exploitation manager at Lafarge Polska, a cement manufacturer, said that buying tire waste is out of the question for his company. "The venture will make business sense but only if the tire makers pay us something for accepting the waste," he said. "It's a technological complication for cement plants, because tires don't burn as well as coal." While coal costs about zł. 150 a tonne, paying some zł. 50 for a tonne of tires, labor, a tire incinerating facility and storage would make tire recycling unprofitable, Ochocimski said. "It will pay off if the tire manufacturer pays a cement plant about zł. 30 per tonne," he said. "Our plants in other European countries are paid by tire makers and the price in the Czech Republic is DEM 50 ($22 per tonne)." Ochocimski expects the plant to burn 3,000 Michelin tires this year. Apart from cement plants, tire recycling firms are also hoping to get in on the action. ABC Recykling, based in northwestern Krosno Odrzańskie, was launched last year in anticipation of the legislation. "It was obvious that as Poland integrates with the EU, such regulations will have to be implemented," said Zbigniew Fleszar, president of ABC Recykling. Unlike cement plants that burn only tires, ABC envisions generating revenue for accepting used tires from producers and from selling the recycled product to rubber goods manufacturers. Like cement makers, Fleszar said his company would charge tire makers about 20% of the penalty fee, which a tire manufacturer now has to pay per tonne under the mandatory recycling limit. The average penalty fee is zł. 1,500 per tonne of unrecycled waste, according to Fleszar, who is optimistic about his new recycling venture. "It's an expanding market, because the 25% (of mandatory recycled tire waste) will rise to 75% in 2007 and because the number of cars in Poland is on the rise," he said.