The recovered paper market is experiencing a ‘ten year low’ in terms of prices and the situation is expected to remain challenging for 6-9 months, according to the Recycling Association.
And, it said that businesses are being impacted by ‘restrictive practices’ by UK mills among a number of uncertain factors.
That was the message yesterday (November 12) from Association chief executive, Dr Simon Ellin, as he delivered a State of the Nation report at the annual Recycling Association Conference in London.
Despite the gloomy picture, however, Dr Ellin said he expected the market to settle down in the longer-term – pointing to emerging markets in Southeast Asia and pull measures created by the Government’s Resources and Waste Strategy, among other things.
The Recycling Association represents more than 80 UK recycling organisations with a particular focus on paper and plastics.
Setting the scene at the start of his speech, Dr Ellin explained that progressive restrictions imposed by China on the import of material starting with Green Fence in 2013 had created the current market situation for packaging grades such as mixed paper and cardboard.
In 2019, the UK has sent just 869,000 tonnes of paper packaging to China, down from a huge 2.6 million tonnes in 2016, he explained, with a total ban expected in 2020.
“This has put a huge downward pressure on prices”, he explained. “We are at a ten-year low in terms of prices. Mixed papers in Europe are negative and we are lurching towards that in the UK.”
Likening the market to an “overflowing bath”, Dr Ellin explained that there was currently not the capacity in the UK to take the material.
He said: “Speaking to lots of people in preparation for this presentation, I think we have probably got 6-9 months of pain here of sustained low prices, we have to be realistic about it. If new capacity comes online sooner it could change.”
Dr Ellin’s comments were echoed by Trevor Williams, commercial trading manager at waste firm Biffa, who was part of an expert panel which discussed the market at the event.
Mr Williams said: “I think you hit the nail on the head when you said we have 6-9 months of real struggling. Over the years we have seen lots of downturns in the market but it has always felt like it was going to be fairly short term. That doesn’t feel the case this time.
“I think we have 6-9 months at least of real struggle. I think we have to look at a number of different ways to move tonnages we want to move. The days of big orders from a few companies are probably over.”
One ‘unknown’ impacting businesses, according to Dr Ellin, is moves by mills to be particularly picky with the material they accept, creating problems for material suppliers. This is something which has seen some bales of material rejected on quality grounds when previously they would have been accepted.
He said: “Can we influence restrictive mill practices in a buyers’ market?”
However, Dr Ellin said that despite the short-term issues, “eventually this bath water I firmly believe will settle down.”
“Can we influence restrictive mill practices in a buyers’ market?”
And, he pointed to the development of 15-20 million tonnes of capacity in Southeast Asia due to come online in the next 1-5 years “as the Chinese move their heavy industry out of China”, as well as other emerging markets in India and Europe.
He explained that these other countries were following China’s lead in imposing quality control measures, explaining that he had led an urgent mission to Indonesia in September “following a lot of flip-flopping in quality standards and chaotic inspections” (see letsrecycle.com story).
And, revealing that he expected the new standard for Indonesia to be “2% non-fibre contamination, reducing to 0.5% in 3-4 years”, he underlined the importance of companies producing quality material, commenting: “I think 0.5% will become the norm.”
On another positive note, Dr Ellin pointed to the government’s Resources and Waste Strategy. He said: “We are now getting change, extended producer responsibility, investment in local authority infrastructure should make it better for us as an industry.”
Looking at what else could be done to help the industry, Dr Ellin criticised the current low value of the paper PRN and attacked the current “obsession” with plastics which he said was at the expense of other materials.
He said: “Because we have been so obsessed with plastics I think we have taken our eye off the other materials – including taking our eye off the fibre ball.”
Dr Ellin called for more investment in UK paper mill capacity and suggested that the 30% requirement for recycled content be applied to all material and that public procurement be used to drive demand.
Looking ahead to December’s General election he added: “This would be a bold move for anyone to do but they are all getting us to vote for them on December 12th so how far are they prepared to go?”