Rubber a hot commodity for Egypt startup Retyres
Driving Cairo’s ring road or through one of its many poorer outskirts, one often encounters the distinct smell of burned rubber: piles of waste can be regularly seen burning on roadsides.
Egypt creates 20 million waste tyres annually and barely 10 percent of those are recycled, Retyres cofounder Mahmoud Mohsen told Wamda.
Only a few sophisticated tyre recyclers exist in Egypt, including Italian-Egyptian company Egitco in Alexandria and a factory named 'Abdulwahhab for tyre and rubber recycling’, alongside small workshops where tyres are reworked manually.
This is the market where Mohsen and his three cofounders - Abdullah Annan, Mahmoud AbdelAziz and Saher Nour - saw an opening for their startup Retyres.
“We looked for something different, not really common, that benefits a problem, and can generate profit,” Mohsen said.
It started out in 2014 when the cofounders, at the time petroleum-engineering students at the Suez Canal University, started a small workshop in the town to recycle tyres and entered a small competition with their idea.
After winning the competition they upgraded from manual to mechanical, have four machines manufactured locally.
Retyres processes tyres into rubber cubes, which are sold on to factories which process them into powder to be used for playgrounds or in new rubber products, or to factories that use rubber as alternative fuel for their power generation.
The Suez workshop ran from February to November 2015, and “business was not really good”, Mohsen said, as they faced difficulties with the machine that extracted the steel from the rubber - all their machines were built locally from blueprints, and this worked out fine for most machines but not the steel extraction one.
Move to Cairo
In Autumn 2015 the team entered the Nahdet El-Mahrousa and Injaz startup competitions and proceeded to win both, taking home 120,000 Egyptian pounds (US$13,500) from each.
Until then they’d bootstrapped, sinking 350,000 pounds (almost US$40,000) into the startup of family investments and personal savings.
With the extra money they are taking the business to Cairo, buying at least two new machines and modify the existing ones. The new workshop will include an imported steel extraction machine. They expect to process 175 tonnes of used tyres per month.
Mohsen said Cairo had more buyers of processed rubber and sellers of used tires than Suez, more support for entrepreneurship, and easier in terms of paperwork: as Egypt’s government is very centralised, all inquiries and documents have to go through Cairo. While government bureaucracy is already notorious in Cairo, getting things done is even harder and takes longer when outside the capital.
And the mindset in Suez was different: “People didn’t really recognize what we were trying to do.”
Ahmed Huzayyin from ‘green’ startup incubator Cleantech Arabia, told Wamda that “tyre recycling is a hot sector”.
“It’s good to see [Retyres] in the market,” he said, adding that he was following Retyres and interested in how they would fare with their new Cairo business.
For Huzayyin, Retyres is one of the “amazing” startups. “They made these major steps one after another,” he said regarding the upgrade of the workshop and now the Cairo move.
Huzayyin said Retyres’ main challenge was now to approach the relaunch as launching a new business. “You really start from scratch.”
The market for recycled rubber in Egypt is on fire.
Last year, the Ministry of Environment implemented new rules on alternative fuels for factories, allowing rubber to be one of those, which has made recycled rubber a hot commodity.
Mohsen is in the late stages of negotiating a contract with one company, which he did not name, which wants a minimum supply of 500 tonnes/month - something they just can’t do yet.
In Cairo the startup can sell rubber blocks through a middleman for 700 pounds/tonne (about US$80), and steel for 1,200 pounds/tonne (US$135), with a combined profit margin of 396 pounds/tonne (US$45), compared to 119 pounds/tonne (US$13) in Suez.
But the goal is to sell directly, where Retyres can capture prices as high as 1,000 pounds/tonne (US$112) for the rubber and 2,400 pounds/tonne (US$270) for the steel.
The environment is a motive behind Retyres. Mohsen repeatedly mentioned the damaging effect of burning rubber, creating toxicated smoke. But first of all it’s a business. Mohsen does not regard using recycled rubber as an alternative fuel contradictory to Retyres environmental motives.
He said burning rubber at factories was different from on the street, as the former must filter the emissions. “I prefer to sell my product to people who process it further, but when the Ministry of Environment agrees upon [rubber as alternative fuel], how could I not?”
Supply is the key
The supply chain is key to the business.
Currently, Mohsen said Retyres collected tyres from workplaces and junk collectors - “little pieces from here and there” - which was time consuming and unreliable, and resulted in an unstable supply of tyres.
He said an agreement with a large truck or logistics company would solve this problem but theeu were keen to sell all the waste of a truck in one batch. Besides, waste from trucks was mostly sold at auctions during which larger parties could easily outbid Retyres.
Mohsen was currently in talks with Pepsico about a direct supply deal of used tyres.
“I just need to change the mindset… a Pepsico deal would be a game changer,” he said, hoping that other companies would follow suit.
Another challenge is the devaluation of the Egyptian pound, which has forced Retyres to rethink its strategy on investing in locally manufactured versus imported machines and equipment for the new workshop. “In just four months, the machinery that cost me 80,000 pounds (US$9,000) now costs me 120,000 pounds (US$13,500).”
Huzzayin agreed with Mohsen on importance of the supply chain but said the market opportunity was “big” and believed the startup had a good chance of success.
He hopes that within a few years, Retyres will not just process wasted tires into rubber cubes, but will start producing its own new products out of recycled rubber.
Before that, having the new workshop operational, including the steel extraction machine, and convincing suppliers to sell directly, are the major steps to take. If this succeeds, Retyres may indeed change the landscape of rubber recycling in Egypt.