Welcome to the January 2020 newsletter. In this edition we cover our latest press announcement of a US$100 million deal for the roll-out of our tyre recycling plants in the US. We also feature various aspects of the US market with respect to tyre recycling and the carbon that is created by our process.
We also take a closer look at the opportunity in Australia, based on the recent export ban on whole baled tyres.
US $100 million deal for plants across the United States
We recently announced in the press that we have secured a letter of intent from a US Corporation to invest US$100m in rolling out GDTC plants across North America.
This is subject to the first plant proving the process and economic viability.
The US scrap tyre industry has long claimed high rates of recycling, but what they have not stated is the share of that high rate that has been exported to India and other countries for use in the crumbing and pyrolysis industries.
Through an introduction by our North American marketing agent, John Lyons, we have been in discussions with a major tyre collector on the East Coast. This company had conducted its own research into viable alternatives as it has a desire to find an environmentally friendly solution. They had conducted investigations and due diligence into the major pyrolysis players in the US and Europe and concluded that the GDTC solution was the best on offer. The coincidental contact by John brought them directly to our door.
This company is moving into an expansion strategy as the tyre collection industry in the USA is going through a state of change. Opportunities for acquisition are presenting themselves and because of its latest expansion drive, they will have responsibility for more than 60,000 tonnes of ELTs in this calendar year. The attraction of the GDTC opportunity is self-explanatory for them.
US end-of-life tyre market
With the pending closure of pyrolysis plants in India, the options for tyre disposal in the US are, like everywhere else in the world, shrinking.
In the State of Pennsylvania, there are over 400 registered and licensed tyre collectors. Many of these are small family operations that have been part of the cash economy and have filled shipping containers on an ad hoc basis and once full, sent them to India .
As a business, they have little or no value (cash based, poor records, no valuation possible) and as family businesses, they are dependent on the enthusiasm of the current and next generation to keep going. For collectors such as the GDTC partner, this situation presents a very attractive scenario in either picking up an established business at an attractive price or picking up customers that have been abandoned by their usual collector.
The Pennsylvania situation is being repeated across the country.
ASTM meeting in Houston
GDTC Chief Operating Officer Trevor Bayley attended the meeting of The American Section of the International Association of Testing Materials (ASTM) in Houston in December 2019.
The organisation was established in 1898 and is currently responsible for more than 12,000 standards that are in regular daily use around the world with our particular interest in that for recycled carbon.
These standards give producers a target to aim for and customers comfort that the product they are buying has been tested to a specific standard suitable for their use.
Standards for virgin Carbon Black (CB or more recently vCB) have been in place for many years now, is produced from fossil fuels, and is used across a broad range of industrial applications.
With the number of claims from corporations that they can produce ‘carbon black’ from ELT’s the more serious enterprises established a new committee within the ASTM to set standards for carbon from tyres, or ‘Recovered Carbon Black” (rCB) and GDTC has been a member of that committee since its inception 4 years ago.
Back in 2015 the meetings were quite sombre, with very little interaction, high levels of suspicion and almost no exchanges of information. That has changed dramatically. Many of the original attendees no longer turn up. Either they have redirected their energies, they have gone broke or their products cannot achieve the standards being set.
All the major pyrolysis companies are represented and its a good opportunity for GDTC to understand what is happening in the global market, who the key players are, where the points of difference lie (and there are many of them) and, most importantly, what market opportunities are opening up.
At the most recent meeting in December 2019 the atmosphere was far more cordial, the information exchange was intensive, while technology comparisons were not discussed.
In fact one company that has invested over US$100k in conducting due diligence on equipment necessary to take their product to market, has given us the results of that due diligence. The industry is starting to become comfortable with itself.
The market for CB is currently at 1.7bn tonnes per year growing to an estimated 2.5bn tonnes in 2030.
Both manufacturers of vCB and rCB realise there is plenty of room in the market so information is being shared. Membership of ASTM, at US$75 per year, is definitely money well spent.
Australia’s whole baled tyre export ban
Late in 2019 Australia’s Prime Minister, Scott Morrison, announced a total ban on the export of whole baled tyres, which creates a great opportunity for GDTC in the Australian market.
According to the latest statistics (Hyder 2014-15) 48% of Australia’s ELT are baled and exported while only 7% are chipped/crumbed and it will be extremely difficult for the chippers/crumbers to fill that gap in spite of their claims to be able to do so.
On top of that, there is the restricted market for their downstream products, so we go from stockpiles of whole tyres to stockpiles of crumbed tyres. It should be noted that the ban does not cover export of crumb rubber to those same environmentally dangerous pyrolysis plants in India. However, it is to be hoped that the economics of the Indian operation will preclude them from taking up that supply.
It should also be noted that Tyre Stewardship Australia was established in 2014 on the premise that they would prohibit their members from engaging in the export of whole baled tyres. Sad to say they have at least two members in Victoria that fit into that category and in addition, TSA are paying for Intertek to conduct very basic audits on the recipients of those tyres in India.
The strong point of that action is that TSA recognise that managing all of Australia’s ELT market domestically is going to be extremely difficult, but perhaps they should refocus their attention to assisting new technologies into the market instead of looking for more ways for the government to subsidise the use of crumb rubber.
US carbon markets
Part of the implication of the recent deal we have made in the USA is the need for an improvement in the commodity pricing for the carbon product derived from our process.
This is due to the currently very low collection ELT fee structure in the US. We are all hopeful it will improve over the medium term, but in the meantime, we need to find new markets for the rCB.
Once again our man, John Lyons, leapt to the fore as he has uncovered more than 50 companies in the US which are in the market for carbon, have a sustainability conscience and are keen to try rCB. Samples have started to leave our Warren facility for some of those.
Simultaneously we have been conducting tests for use of carbon in in resin in Japan with those results expected mid-Feb.
Our friends across the Tasman at CarbonScape, on return from their Xmas/New Year break, will start a comprehensive battery of tests with our product to refine their process to suit.
Our mutual target is for CS to get to the point where the conversion rate of carbon to graphite is such that it makes it attractive for the global graphite market. CarbonScape have a high level of confidence they can achieve the target and we are doing everything we can to help.