8 July 2015 by Will Date

HDPE price hit likely in face of Closed Loop crisis

The price paid to local authorities and waste management firms for HDPE milk bottles is expected to fall due to the imminent shutdown of Euro Closed Loop Recycling’s Dagenham HDPE recycling plant.

Staff at the site have been told that the facility will cease production today (July 8). But, it is expected the company’s offices are to remain open while directors and shareholders seek a resolution with clients and suppliers over the losses that the company is making.

Afzal Majid, a shareholder in the company which now has its head office in Yardley, Birmingham, has said in a statement: “On Monday 29 June 2015, 32 staff were laid off with an additional 12 moved to shorter hours and the plant is now operating on a 4 day working week. This, however, is not sustainable and it is therefore our intention to cease production and lay off an additional 60 staff on Wednesday 8 July 2015 unless a solution can be found.”

Bales outside the Closed Loop plan in 2011

Bales outside the Closed Loop plant in 2011

The halt in production comes after it was revealed on Monday that the company is losing around £300,000 per month, only two months after having been bought out of pre-pack administration by Birmingham-based investment firm EuroCapital.

Production

Problems at Closed Loop are understood to have become acute as the company has failed to convince bottle blowers and the dairy industry to pay a premium rate for the supply of rHDPE material for use in the production of new milk bottles. And the company has also hit out at what it sees as disparity between export and domestic PRNs.

Some of the blame for the problems at the Dagenham firm has been attributed to a fall in the price of oil in late 2014, which subsequently pushed down the value of virgin HDPE, making rHDPE, which has traditionally been a lower cost material than virgin polymer, a less attractive option.

The cost of running the Dagenham site’s system of sorting, washing and flaking equipment on the rHDPE production line has also kept overheads high and meant that production costs have reached unsustainable levels.

However, industry sources claim that the situation is more complicated than just involving an oil price fluctuation, with Closed Loop Recycling having made losses in consecutive years totalling £2.9 million in 2012 and £3.6 million in 2013.

Previously, the Waste & Resources Action Programme which helped fund Closed Loop, said the plant took in about 875 million bottles a year equating to about 35,000 tonnes of material and opened in 2009.

At its peak the plant was taking in excess of 2,000 tonnes of plastic milk bottles per month, making it the largest domestic outlet for the material with talk in 2013, supported by WRAP. Biffa Polymer’s Redcar bottle recycling plant is now the only major UK-based competitor to the Closed Loop site, taking in around 800 tonnes of material per month, much of which is sourced via long-term local authority collection contracts held by Biffa.

Market

While the Dagenham site has been running at a significantly reduced capacity in recent weeks, a complete shutdown of the processing plant is likely to mean that several thousands of tonnes of the material that previously would have been processed in Dagenham will have to be sent elsewhere – most likely overseas.
A plastics industry source, said: “The bottle price may come down. Closed Loop were buying close to 300 tonnes per week, so for the next couple of weeks the bottle price may come down, while the export market absorbs some of the tonnage.”

However, others have warned that uncertainty in the export market caused by wrangling over the future of the Euro as well as a slow-down in purchasing in recent weeks from Chinese buyers is likely to mean that demand from overseas will also soften.

Described as high-tech by WRAP, the organisation is expected to be disappointed at its current plight

Described as high-tech by WRAP, the charity is expected to be disappointed at Closed Loop’s current plight

Before having been placed into administration, Closed Loop is said to have explored the option of a rescue package from several sources including the Department for Environment Food and Rural Affairs (Defra) and the Waste & Resources Action Programme (WRAP) although it is believed that any new funding would have come too late to save the business.

WRAP

A closure of the plant is likely to come as a serious disappointement to WRAP which had helped fund its development. In 2013, chief executive Dr Liz Goodwin was telling an international audience in Africa about the success of the Closed Loop project.

Dr Goodwin said: “To return to the problem of plastics bottles … we tackled the issue head on. We brought together local authorities, waste management companies, bottle manufacturers, brands such as Coca Cola, retailers, and banks.

“Together, we develop a shared ‘closed loop vision’, taking the humble plastic bottle back to its beginnings and mapping a new journey for its lifecycle – one that did not involve landfill. The result of that approach?

“World-leading technology was developed, to produce recycled material that meets this country’s high standard specifications for food-grade plastic.  Investment was secured to build a new plastics reprocessing plant.

When the resulting Closed Loop Recycling plastic bottle factory in London opened in 2009, it provided more than 100 local jobs. Today, the plant processes getting on for a billion discarded soft drinks and milk bottles made from plastic a year…. and recycles them back into food-grade plastic.”

Dr Goodwin added: “Another thing to remember about this is that this is a complex, ‘smart’ manufacturing process – Closed Loop Recycling is not a waste management operation – it’s clean, high tech.”

2COMMENTS

Aylesford, Closed Loop – is it the case that the UK recycling sector is inherently unsustainable? What’s the point of collecting more and more material if there are no local reprocessors to take it?

Posted by FSawyer on July 9, 2015

UK recycling sector in not inherently unsustainable, the problem is companies not investing in modernization to keep them competitive. As in any other industry if you stop in time and don’t innovate you are dead.
Operational overheads can be cut down with the correct equipment for a process that can handle the feed stocks variations without sacrificing quality, yield and processing costs.
The quality of the feedstock is deteriorating all the time, the quality demands for the finished product is increasing.
This gap can be bridged with the right long term investment in a planned sustainable solution where every player in the loop is as efficient as possible.

Posted by Observer on July 10, 2015

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