The Recycling Association has today (November 26) urged businesses not to be complacent over the state of the global economy and has issued a warning over the falling value of recyclable materials.
The Association, which largely represents paper and plastic recycling merchants and exporters of recyclable material has claimed that commodity prices are falling while costs incurred by the sector are rising.
This, the organisation claims, means that the revenue available from the sale of recyclables has fallen significantly when compared to twelve months ago. The comments have led the Association to tell producers and retailers to ‘manage their expectations’ over the cost of handling waste material.
The Association’s chief executive Simon Ellin, said: “The recycling industry is a very good indicator of how the economy is doing because we are dealing in waste products produced by businesses and the general public and, in a recession, the public cut down on their purchasing so businesses have to curtail their production – this impacts right the way through the supply chain from packaging to marketing materials.
“If the public are not buying and the mills are not producing – demand becomes weak and prices fall. This is very much the case now and although we have experienced some recovery over the past two years, the economic improvement forecasts fed to us by the government are simply not filtering their way into the recycling industry.”
Across the commodities sector there are a mix of views as to the current situation which is generally seen as very poor, at least for the next three months.
Commodity prices did reduce in 2012 and then fell further in 2013 by about 10% although they were still generally higher than in the years before. But, the first part of 2014 saw less volatility although now, with Europe still struggling in the wake of the recession, sentiment has weakened and the markets are seeing commodity falls which are towards more realistic levels, one analyst said. Ferrous grades have reduced with the light iron price now down to £90 or lower and similarly prices for other grades over the past few months.
There is pessimism in the cardboard sector over orders for used material over December. While the new Smurfit Kappa lightweight board making machine at Snodland is expected to start up in February, the impact in domestic demand is not expected to be seen for a few months yet. When it does start up, the tonnage which the company has currently been exporting is to be diverted to Snodland so there is likely to be increased export demand for material.
There is, however, also a small measure of optimism in the cardboard sector with a view that there is a good chance that exports to China will firm up again once current licensing arrangements are resolved. A number of smaller and middle-sized mills are buying less or nothing at all as they are waiting for import licences.
If the public are not buying and the mills are not producing – demand becomes weak and prices fall. This is very much the case now and although we have experienced some recovery over the past two years, the economic improvement forecasts fed to us by the government are simply not filtering their way into the recycling industry.”
However, material is still being bought by the larger businesses although there may be some interruption in December/January because of Chinese New Year.
The outlook for mixed material is also gloomy with some merchants saying they will sort material but the costs of doing this can be challenging in the face of lower prices for cardboard and newspapers.
One factor that the recovered paper sector is having to take on board is the moisture problem. Several exporters to China are now imposing small penalty charges on material that is wet. One expert told letsrecycle: “Tests are being imposed now and buyers are adopting a stricter approach. The mills are finding it more costly to use wet paper and there are other costs such as cleaning out containers for use again.”
Another view in the cardboard sector is that merchants and waste management companies “may have been spoilt a bit over the past few years with prices over £100. Those figures were a bit of a dream and towards the £80 mark sounds more reasonable. It is important that the producers of used cardboard from retailers to manufacturers realise this and so they will find their rebate for the material reduces.”
One merchant suggested that there will need to be more of a focus on preparing grades to ensure that the better prices were achieved.
Councils and glass
One market sector that is being hit hard at present is the used newspaper market. Already UPM has announced the proposed closure of its smaller machine of two at Shotton. And, newspaper producers are forcing down the price they pay for the recycled newsprint from the UK’s three newsprint mills.
“Consequently,” said one mill source, “councils will need to be aware that prices for newspapers are falling. Prices are being pushed down and maybe councils with long-term deals will be insulated, but in the short term prices are down and the commingling basket value is reduced.”
The local authority commingled basket price is also expected to fall, partly because the value of used glass has tumbled in recent weeks.
One paper recycler hit out at the idea that WRAP was going to be able to get councils more for their commodities. “I can’t understand where WRAP and others think they will get more for commodities unless perhaps they have substandard material now and improve the quality a lot. Maybe the talks are taking place with the finance directors at councils rather than waste or recycling officers.”
One top figure in one of the UK’s leading waste management companies told letsrecycle.com: “local authorities will have to recognise that the value of commodities is down. We are already providing services at very competitive rates so there are no margins to reduce there, so local authorities will have to accept that the value of materials is going to fall.”