The interview discusses Japan's recycling sector and its challenges, focusing on Kokubu Shokai's efforts in tire recycling and sustainable practices. Despite Japan's commitment to carbon neutrality, the sector struggles with limited standards and collaboration between government, manufacturers, and recycling firms. Kokubu Shokai addresses these challenges by advancing automation, diversifying its product range, and promoting retreaded tires.
From the perspective of a foreigner, Japan has a strong position on carbon neutrality and environmental consciousness, yet during many interviews with other recycling firms, we’ve heard repeated frustrations about the lack of a solid framework and collaboration with the government, manufacturing companies, and design firms in realizing that vision. For example, the Japanese industrial standards for products produced from recycled materials are extremely limited. What is your analysis of Japan’s recycling sector and what are the main obstacles currently hindering progress?
Carbon neutrality is something that has been recently called out and so SDGs are a relatively new trend. Long before this became a popular topic our firm has been focused on creating a sustainable society. The reason we established the agricultural entity of our, Kokubu Green Farm in 2009 was to make natural grass (turf) and therefore contribute to the reduction of carbon dioxide.
Our mainstream business is tire recycling. The Japanese government has set targets for 2030 and 2050 for carbon neutrality, but in discussion with manufacturers we’ve come to understand that industry-wide, there is a lack of clear solutions to achieve this carbon neutrality. This is why many firms have asked for our advice in terms of setting solutions and giving guidance on actual recycling activities. There needs to be a common understanding established between the government, manufacturers, and recycling companies to achieve these lofty goals.
Another aspect we wanted to talk about was Japan’s demographic situation. Japan has an aging and shrinking population. It is estimated that by 2050 the population will drop under 100 million with one in three people over the age of 65, meaning that Japan is facing a labor crisis and an issue of technical inheritance, but then there is also a shrinking domestic market to sell products to. What are some of the challenges this demographic shift has presented to your firm and how have you been reacting to them?
This population issue is posing a threat to our company in terms of the lack of manpower. To avoid issues as a result we are gradually automating the processes at our factory and stockyards. Eventually, we want to create a fully automated system of remote-control robotics to operate our factory. As for the shrinking market, we are looking to diversify our business. Currently, our focus is on PCR tires, specifically bus tires, and truck recycling tires, but now we are looking to open our business to larger-sized tires used in agriculture, industrial tires, and airplane tires. This is why we are making investments in additional machinery for processing and innovation as the Recycling Department.
If you look at the tire recycling market, it lived a very tough time during the COVID-19 pandemic because many plants were closed and therefore it was difficult to acquire tires for recycling. However, since then the market has picked up and various associations are now encouraging companies to recycle tires. At the same though, the market has certain limitations. For example, there are very strict government regulations when it comes to stockyards for tires due to the risk of a fire. What is your outlook for the tire recycling market over the next 2-3 years and what do you think will be the main growth drivers moving forward?
Looking at the past 10 years, the demand for waste tires has risen. Annually in Japan, there are 1 million tons of waste tires and 94% are recycled. Recycled tire usage is difficult to keep stable, and the situation is drastically changed, now since SDGs and carbon neutrality are a hot trend waste tires have become an energy source for some factories to replace fossil fuels. Since demand has become so great over the past 2-3 years, we have had to import tires from overseas.
It is hard to say what the upcoming decade will be, but in the following 10 years, we do foresee continued increases in demand for waste tire chips. That will continue to be the main business operation of our company.
Your company cuts and processes used tires as an alternative to fuel, and the chips processed by your company are used in thermal energy generation by several companies. Of course, there are some challenges associated with this recycling method. How is your company reacting to these challenges and how is Kokubu Shokai superior to other tire recycling companies?
What each client demands of us is different since they all have different incinerators and boilers. Some companies want one-inch tire chips, but other companies want two-inch or even four-inch chips. We have a variety of sizes to offer our clients.
Other companies do offer similar types of variations, but I would say the uniqueness of our company is the quality we offer. Waste tires are comprised of waster rubber and steel wire, so the offerings we can provide depend on the customer’s requirements. To create this level of quality chips you have to have high-quality engineering technology as well as well-maintained machinery.
Since you said that quality was one of the unique aspects of your firm, we wanted to ask about your retread tire business. When it comes to retreading tires, quality is of course very important. The pricing of retreaded tires is obvious since they often sell for around 70% of the price of new tires, however, there are limitations on the belief surrounding the performance of such tires. Many companies will go ahead and purchase newer tires since they believe that the mileage isn’t going to be as good, and that heat will impact retreaded tires more than new ones.
The core advantage of choosing retreaded tires over new tires is the price. With recent inflation rates and surging oil prices, the only real area where consumers can cut costs in terms of their vehicles is with the tires. Companies are now starting to choose this avenue as a way to reduce their costs.
In terms of mileage, we place new tread over the tires, so the mileage does not change compared to a new tire. We’ve seen recently that tire manufacturers are shifting to the promotion of retreaded tires because that reduces 64% of the environmental burden during production, reduces 50% of the rubber usage, and reduces 51% of CO₂.
However, the use of retreaded tires in Japan is still low at 20% compared to 50% in other countries.
We must also help promote the use of retread tires.
Your company handles rubber from several sources including bicycle tires, pressure hoses, conveyor belts, and many more. Among all of the products you handle, which do you believe has the most potential for future growth?
We see a growing demand for the artificial carpet that Kokubu Green Farm produces. This is an artificial grass where waste rubber is used to keep the grass on the tarp firm as well as a cushioning material. Also, our waste material is used to create rubber pavements that are used in kindergartens and elementary schools. This particular application is seeing high demand recently and in this use case, we use truck tire waste material.
In 2009 you established Kokubu Green Farms, which focuses on selling agricultural products and equipment such as fertilizers. Why did you venture into the agricultural field and how does this venture synergize with your other business?
Since Japan's food self-sufficiency rate is only 38%, so Kokubu Green Farms was established in 2009 with multiple purposes in mind. Firstly, Japan is struggling with the high potential for food shortages so we wanted to increase the food grown on national land. We also established farms to promote the hiring of senior citizens, basically we want to give a second career to workers who are deemed too old for other work. Many people above the age of 80 are working at the Kokubu Green Farms.
Additionally, at the time of establishment, another purpose of Kokubu Green Farms was to reduce the urban heat island (UBI) effect by adding a lawn and tarp to a rooftop. Overall contributions to environmental consciousness are the core purpose that defined why we established Kokubu Green Farms.
From our research, we saw that Kokubu Shokai leverages a network in over 50 countries around the world with over 140 overseas partners. What advantages do your overseas operations have in terms of international business and what strategies do you wish to employ to further enhance your international presence?
Our overseas business is centered on used tires and casing tires used for retreading and in the various fields derived from them, our goal is not only to protect the environment in Japan, but also to share Kokubu Shokai's knowledge with developing countries, and by extension, the entire world, to protect the earth.
Among your exports, you have a very strong focus on Asia and the Middle East, but you also have a presence in North and South America. Looking at the future, what markets or regions do you believe have the highest growth potential?
We think there is potential for growth in Africa, Southeast Asia, and other countries with growing populations in the future.
For example, India is another region seeing huge market growth, so that area might hold potential for our firm. Southeast Asia and India are regions that we will be keeping an eye on moving forward since they do hold huge potential.
Imagine that we come back in five years and have this interview all over again. What goals or dreams would you like to have achieved by the time we come back for that new interview?
Our company is not a monozukuri company and we don’t have our own factory or produce our own products, however, we consider ourselves more of a solution provider, giving the customers understanding and adequate service at a low cost. With the recent trends in sustainability and SDGs, companies and governments are all aware of the necessity to contribute to the environment, but unfortunately, cost is often a hindrance. One of the advantages that we have is that we can gather waste tires in mass quantities and reduce the cost of recycling. This puts us in an advantageous position and for the future we hope to leverage this position further.
For more details, explore their website at https://www.kkb-tire.co.jp/
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