R2 and RIOS versus E-Stewards: Ewaste Predictions

After several meetings with several players in the climb to "ewaste authority", between BAN, ISRI, EPA, GAO, and others, I think I can make a few predictions.

1) E-Stewards will take too long.

2) TV Recycling will be left behind

3) Reuse economics will struggle

4) Mexico will emerge on top

5) Investments will pour in where there is volume, regardless of the margins (a mistake)

BAN is trying to sit on its hands and let independent auditors work with the various stewards, and that's a good move. But some of the e-Stewards are already doing something BAN disagrees with - defining "functional" in the R2 way (the components the buyer wants are guaranteed, the buyer can replace and upgrade as they wish) rather than the BAN way ("tested working", with no parts to be replaced or upgraded after purchase). And there may be other definitions BAN objected to in the R2 discussions, such as "de minimus" quantities of circuit boards from shredding operations. But BAN has trouble saying "yes" to processes they don't understand, and this will slow them down, forcing them to criticize R2.

The highest margins in our business are for relatively low-volume, high-margin, "risk averse" clients with off-lease laptops and Pentium 4s. Companies like Intechra and Redemtech will be the first to ante up and get certification, perhaps both certifications. Companies like mine will not lose a single mixed-load, TV carrying client to those companies. There may be a couple of TV processors who will get the certification, but they will prove unable to pass those costs along as a benefit if fewer than 15 TV-processing companies become certified.

The 22.5% of our material in Vermont which was sold for reuse and repair generated more than 50% of our income, which is rewarding. However, it will be harder to follow downstream and certify. Companies which ignore the reuse market, or reuse only commercial off-lease equipment (insignificant residential reuse) will find it easier to get certified, but will be forced to pass the costs - not just of certification itself, but of lost reuse revenue - on to municipal clients who will not feel forced to buy in if other companies (moi) can convince them it's dumb to dump a 1999 TV into a shredder. So they will promote legislation.

Where legislation passes, the certified will win, and will get certified by reusing less and passing the higher costs through to the legislated OEMs. The computer and printer manufacturers will be able to accept those costs because the "white box" or "clone" markets are growing at a wicked fast pace, and recycling costs are seen as an offset against "market cannabalization". The TV companies, however, which have far more tonnage, have no skin in that game, and will see the entire system as stacking up against them.

Our strategy is to convince the TV companies that reuse and repair can be a good news story, by focusing on companies like Retroworks de Mexico, and the jobs and lives improved by Las Chicas Bravas. TVs are too big and heavy, and too light in specialty metals, to be shipped to China. Repair and reuse, and increasingly the CRT glass, will move to Mexico.

Why write up my strategies? Because of point #5. It will take longer to certify the reuse component, and the legislation-pushed volume will entice investment (which we expect a lot of) into the black-box, shred-and-send-the-bill-to-OEM, system. We have to provide a business plan not just for our own investors, but to signal investors we haven't met not to participate in a pyramid scheme with shredders. The Mexico strategy has a precedent - all TV manufacturing and assembly jobs moved to Mexico in the 90s. It's not exactly a crazy idea. If it is done right, Americans will prefer paying 5 cents per pound in Mexico to 20 cents per pound north of the border. But metals and recycling and USGS predictions mean that we don't have long before investors start pouring in... which is why I post about mining pretty often.

Good points are not just to win investors, they are to stall investments in our opponents.

1 comment:

Anonymous said...

Dear Robin:

I noticed your commentary regarding our e-Stewards program. I don't know what you mean by BAN "sitting on our hands". We are moving as rapidly as possible to make this industry more ethical and to prevent the export of toxic waste electronics either under the guise of recycling or re-use from being dumped offshore, externalizing costs and exploiting the poor. As you know our current batch of e-Stewards are going to have to "graduate" to become fully certified by independent auditors working for accredited certifying bodies. If, as you claim some of our current "Pledged e-Stewards" are not operating in accordance with our "e-Steward standard" or even of our old "pledge" that will all become very apparent once they are audited. Bu the way, the "tested, working" way, is not BAN's way, but the correct interpretation of the Basel Convention and "tested, and working" requirements are now being put forth in the new WEEE directive in Europe, in Australian law and will be quickly spreading around the world. Meanwhile in the US we have almost no legislation and literally hundreds of unscrupulous global dumpers. e-Stewards is a long overdue way of separating the wheat from the chaff. The e-Stewards Standard favors re-use, even export for reuse, but only when testing is done first to ensure against sending junk or toxic e-waste along for the ride. Hoping someday very soon, GoodPoint gets on board. -- Jim Puckett, BAN.