Recycling collection contractors and brokers appear to be bearing the brunt of a slump in the recovered glass market triggered by the plummeting value of the glass PRN.
The use of fixed-price contracts – which sees a council paid a set value regardless of market conditions – appears to have protected many local authorities to some degree against the decline in prices experienced over the past couple of months.
The glass market has remained depressed since the end of September, when the price of green and mixed glass experienced its first substantial fall in over a year. The fall was seen as a response to the surplus of packaging recovery notes on the market, which had caused the value of glass PRNs to sink.
And, last month, the price of mixed and green glass fell to between £0 per tonnes and £5 per tonnes, with it suggested that, in some cases, local authorities would have to pay dispose of glass material (see letsrecycle.com story).
Commenting on the impact for councils, the majority seemed to be assured that their standing arrangements would hold them in good stead.
David Mansell, strategy and communications team leader at the Somerset Waste Partnership (SWP), told letsrecycle.com: “We are more fortunate than most because [in our contract] it is for our contractor to market the materials and then they receive the income. The glass is with May Gurney who carries out our kerbside service.”
Mr Mansell said that May Gurney sends the recovered glass to O-I Recycling, adding: “They [May Gurney] are not expected to be as badly hit as some as the glass is colour separated and is high quality. They are expecting the price to go down but will still receive an income unlike some other councils who collected mixed glass.”
Impact
Some councils have been impacted by the decline in value, with Staffordshire Moorlands district council stating that the slump has led to its recycling contractor doubling charges to collect glass from the council's bring banks.
Nicola Kemp, environment manager for waste strategy and performance at the council said: “The price for glass collected at the bring sites has now increased. But, it is marginal when you look at the full figures for the amount of glass we collect at the kerbside. On the whole, it is a few thousand pounds in relation to a deal worth millions of pounds, which I admit is not ideal.”
However, exemplifying the different arrangements across the country, Suffolk county council said that it had been impacted by the fall. A spokeswoman said: “We share the risk of price fluctuation in the sale of our recyclables with our contractor. So, yes, this has affected us.”
Contractors
I think that it is the contractors that are going to have taken the risk on the value. I think all of the councils will not be that affected
Tim Gent, Recresco
On the contractor side, glass reprocessors have noted a marked impact on the market and acknowledged that recycling firms would have entered into contracts with councils based on fixed deals given the traditional stability of glass prices.
Tim Gent, a director of glass recycling firm Recresco, told letsrecycle.com: “I think that it is the contractors that are going to have taken the risk on the value. I think all of the councils will not be that affected, as they will still get the landfill diversion and the recycling credits and will largely been unaffected by the price.
“But if you are a recycling company or a recycling contractor with a MRF or operating kerbside collections and one-third of your revenue maybe more, in fact one-third of the weight you deal with, is glass and now you have to pay to get rid of it rather than being paid £20 per tonnes for it, then that is going to hurt.”
However, Verdant Group, which provides commingled recycling collections for a host of local authorities, claimed that it had not been impacted by the decline in glass. A spokesman for the company told letsrecycle.com: “The fall in glass prices has had very little impact on Verdant.”
And, assessing further declines, a spokesman for a glass recycling company said that quality was an increasing issue. He said: “I don't know that it [the price] will go any lower. The better quality glass, such as that from bottle banks or the kerbside, will hold up but MRF material will probably face a £20 per tonnes gate fee.”
Knock-on
At Huntingdonshire district council, the local authority said declined to comment on the impact of the decline on charges for collection from its glass bring banks as it is currently tendering for a new service provider. And, it added that the price paid for mixed glass at the kerbside was protected under its existing collection contract.
Sonia Hansen, street scene manager at Huntingdonshire, said: “We have glass collected commingled at the kerbside which goes to [Viridor's] MRF but there hasn't been any change on that because it is part of a mixture of material going there. We have a bundle deal on our gate fee and that hasn't trickled down and impacted us yet.”
Another council recycling officer said that while it appeared that local authorities may be able to contend with the fall at the moment, there was a fear that contractors would only be able to bear the brunt of the price fall for so long. He said this could have a knock-on effect for councils, even those with fixed price contract.
He said: “Our approach has always been to seek a fixed price contract because that is our approach, other people have different approaches. So in some cases, the contractors will have to absorb that cost and, again, the problem is if the market price is different to the price we are getting they could stop it. It is a situation we haven't been in before.”
Councils
In the wake of further falls in price in November, the Local Authority Recycling Advisory Committee (LARAC) claimed that the majority of councils would not experience significant repercussions from the decline – as a large number of contracts place the burden of risk on contractors (see letsrecycle.com story).
One council recycling officer, who wished to remain anonymous, said that suggestions by LARAC that councils may look at colour separation for glass in the wake of the price slump would not be likely to happen.
He said: ” It is my guess that kerbside sort authorities may look at that separation now but I think it is such a small fraction and would cost you more in time [of collections]. If you can get rid of your mixed glass FOC, I don't think councils will take up this option.”
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