Saskatoon company Shercom shuts down tire processing operations after contract not renewed

A Saskatoon company that makes rubber products from recycled tires has had to shut down its tire processing operations. 

Shercom Industries Inc. has been negotiating a contract renewal with non-profit tire management and recycling program operator Tire Stewardship of Saskatchewan (TSS), but negotiations have fallen through.

Shercom is no longer accepting used Saskatchewan tires, and as of May 1 is also not processing tires. Its manufacturing operation is continuing in Saskatoon, but now it will be sourcing crumb rubber from processors outside of the province.

Shane Olson, founder and owner of Shercom, said the company employed 137 people in 2022. Now there are only 75 employees due to layoffs. 

During contract renewal negotiations at the end of 2020, Shercom told TSS it wanted three things: a voice in the future of the industry, assurance of tire supply and an increase in its tipping fee, which had not been increased since 2012. 

"It was a simple request that simply said, 'hey, we need an inflationary adjustment that is reflective of the CPI index for inflation.' And that was prior to this outrageous inflation we've had the last two years," Olson said.

Instead of an increase in the tipping fee, TSS offered Shercom a 30 per cent decrease, Olson said. 

"It was a shocking move. It made no sense to us and it felt like a bullying tactic. But it also felt a bit like extortion because of our significant investment," he said.

"Up until then we were able to take an environmental hazard and turn it into a renewable resource for the benefit of the community, the economy and of course the environment."

TSS has now signed a tire processing contract with U.S. company Crumb Rubber Manufacturers (CRM), which will begin operations at its facility in Moose Jaw in the coming weeks. 

Saskatoon Chamber of Commerce upset over decision

On Tuesday, the Greater Saskatoon Chamber of Commerce sent a letter to Saskatchewan's Minister of Environment Dana Skoropad calling Shercom a "made-in-Saskatoon success story."

The ministry provides oversight for TSS. 

"Under the free market, Shercom Industries became the largest tire collector in the province, and the only tire processor. Shercom's success in tire collection was owed to its preferred service, its dealer loyalty program, its community sharing program, and its consumer-based zero-cost tire recycling program," said the chamber of commerce. 

Since Shercom will continue to manufacture molded goods like tiles, blocks and rubber pavement in Saskatoon, but will not have material on hand from processing tires, the company will have to buy crumb rubber from Alberta, B.C., and Manitoba. That will mean significant freight charges. Shercom said this may mean it will not stay in Saskatchewan in the future. 

The Greater Saskatoon Chamber of Commerce said in its letter that that news is "alarming and concerning" and means job losses for the economy. It criticized TSS for taking opportunities away from Saskatoon and reassigning them to business interests from outside Canada's borders. 

On Thursday, the province told CBC News that the Ministry of Environment had no direct role in TSS's contractor selection process or the financial management of the program.

It commended TSS's agreement with CRM for its Moose Jaw facility.

"The Government of Saskatchewan is encouraged to see yet another positive investment in our province's already robust suite of waste diversion and management programs," said the province. 

A second tire processor 

Stevyn Arnt, CEO of TTS, said the organization has plans to issue a request for proposals for a second tire processing facility for the northern zones of the province next week. He encourages Shercom to submit a bid. 

Arnt said TSS is trying to reduce and maintain a low level of fees on the environmental levy that is charged in the sale of a new tire in Saskatchewan. It also wants to reduce greenhouse emissions. 

"One of the reasons we wanted to bring in a second processor was to allow for us to save on not only the freight savings on shipping tires from the farther southern portion of the province all the way up to Saskatoon, but to ship it to a much closer distance. Because that only would not not only save us dollars on freight, but also on the greenhouse gas emissions associated with it," Arnt said.

Olson said there are not enough tires in Saskatchewan to have two tire processors.

Marlin Stangeland, CEO of Shercom, said TSS is planning on redirecting a minimum of 40 per cent of tires to the U.S. company in Moose Jaw. He said Shercom does not know how the remaining percentage will be allocated.

Stangeland said Shercom cannot say at this time if it will bid to be the second tire processor for the northern zones, because he is not sure if it makes economic sense for the company. 

Meanwhile, Arnt said TSS is really excited about the advanced technology CRM is bringing to Saskatchewan. 

"We're going to be having a much sharper reduction of our overall carbon footprint because the processes that we're bringing on board, including CRM, are producing materials that displace a lot more carbon intensive competitors. And it's a recycling initiative that will do so much good for the environment here," Arnt said. 

As for jobs, Arnt said both processing facilities will come with many jobs for Saskatchewan's economy. 

As Shercom recovers from its recent layoffs, it has signed an exclusive contract with Nike Grind to provide recycled rubber paving for playgrounds.

"We're expanding our licensed installers from 22 across Canada to adding another 272 licensed installers," Olson said.

"What's baffling is that the world loves Shercom and loves what we're doing. We're only rejected in our home province of Saskatchewan."