13 June 2016 by Tom Goulding

Rainham’s Ecotech enters administration

EXCLUSIVE: Plastic bottle recycling business Ecotech London Ltd has entered administration, dealing a further blow to the UK’s plastics reprocessing sector.

The East London-based business closed it gates to incoming material two weeks ago (31 May) with the intention of ‘restructuring its operations’ ahead of reopening.

Ecotech chief executive Javed Mawji, pictured at the plant in January 2015

Ecotech chief executive Javed Mawji, pictured at the plant in January 2015, says the plastics recycling sector needs “legislative support”

However, in a letter dated last Thursday (9 June), Ernst & Young wrote to all known creditors and suppliers announcing the company had been placed in administration.

Insolvency practitioners Charles Graham John King and Robert Hunter Kelly, who have been appointed joint administrators of the business, write that they will be preparing a report to creditors “within eight weeks” with an indication of whether they will be paid.

Mr King notes that any debts incurred by Ecotech before their appointment will rank as “unsecured claims” against the company.

With capacity to process about 18,500 tonnes of clear PET and mixed plastic bottles at its site in Rainham per year, Ecotech was able to produce a clear PET plastic flake which was extruded for use in the production of food-grade plastic packaging.

Staff

News of the company’s insolvency will comes as a disappointment to staff at the plant, a number of whom had been made redundant at the end of May, but had hoped that the facility would be reopening shortly. A total of 39 people are confirmed to have been laid off.

Sources within the plastics industry have recently claimed that a significant fall in the price of virgin polymers since the start of 2015 has put major pressure on plastics recycling businesses, with some having had to cut costs to survive.

Javed Mawji, chief executive of Ecotech, told letsrecycle.com that the company was assessing options but could not speculate on whether it would find a buyer.

He added that “legislative support was needed” if the plastics recycling sector was to survive, and blamed Ecotech’s closure on mechanisms within the packaging recovery note (PRN) system.

Mr Mawji said: “We found that the price of flake is very low and at the same time the price of bottles is high, given the quality in bottles and the PRN system which is encouraging that.

“The low flake price is a global phenomenon, and the PRN system has made that situation more hostile than it was anyway. PRNs are based on gross weight and there is no quality component, so we find yield going down and down because of contaminated material.”

He added: “Not all feedstock was below par but there was a lot of low quality material we had to work with.”

The £6.5 million plant was set up with financial help from LWARB.

The £6.5 million plant was set up with financial help from LWARB.

LWARB

The £6.5 million Rainham plant was set up in 2014 with £2.2 million in financial backing from the London Waste and Recycling Board (LWARB), as well as support from German PET recycling plant designer STF Group.

Commenting when Ecotech first closed its gates, LWARB said: “The plastics recycling industry in London, as in the rest of the UK and globally is under extreme pressure as a result of low oil prices. We also have concerns, as do many others in the sector, that the PRN system is not helping UK plastics re-processors at this time.

“Clearly while oil prices remain so low the sector will continue to struggle, however LWARB is looking at working with other European cities and the Ellen MacArthur Foundation, as part of its New Plastics Economy project, to support the sector in the future.”

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