Market driven quality

The latest move, by the Chinese agencies to pre-notify recovered material shipments has again raised issues about the viability of long term supplies to the Asian market. Although not onerous on their own it has again raised the bar on what is expected from an under pressure industry. Margins are already slim with high prices being paid to attract scarce material into processing facilities and end users being able to keep their buying prices down on the back of increased collection volumes in the Chinese domestic market. These slim margins are also being put under further pressure with many end users extending their payment terms.

These market dynamics are forcing suppliers to review options as in some cases supplying a fickle Asian market on tight margins is not for the faint hearted.

The reality is that with China seeking to generate a substantial volume of recovered materials from within its own boundaries by 2015 it will only seek to take the highest quality product from third party suppliers and the latest move on pre notification is just another step to achieving that goal.

Green fence

What has happened, however, since the introduction of the initial Green fence initiative (Chinas first quality acceptance program) is that suppliers of recovered materials have sought to improve the quality of the product that they produce. They simply had to, as the Chinese market offered the major destination for the recovered materials. Most processors have now not only enforced quality tacking programs seeking to identify issues with both incoming and outgoing materials but have also improved their factory operating procedures.

With the UK seeking to follow suit through the publication of its own set of quality specifications we are now at a stage where operators are being forced to re-invest in their existing facilities to improve separation and throughput still further. First and even second generation MRFs (recycling facilities that separate recyclables that have been mixed together) in many cases cannot meet the quality requirements and going forward there will have to be significant site by site investment to produce the desired effect.

Much has been made of the MRF code of practice but in reality the market is driving operator quality. At one time the code was seen as a driver for increasing quality but now it may well be seen as a mechanism by which people record the improvements they have made. It will of course provide a road map and a system but it will no longer be the driver.
The Asian market is dwindling in importance to UK processors as the European market increases to fill the void. What will happen, however, is that the quality standards set over last few years in Asia and particularly China will simply be transferred and introduced into the new generation end users. The new facilities will not incorporate the same recovered material tolerances that had previously been acceptable and the onus will be entirely on the supplier to meet the quality standards.

Supply chain

There is now a growing acceptance in the UK that the responsibility for providing a quality product does actually lie within the whole supply chain. For many years the responsibility was perceived to be with the operators but now all stakeholders agree that every part of the chain has a role to play.

With energy playing an ever more important role in the UK and with waste being a plentiful supplier into that market it is critical for the UK economy that we do not allow seepage of recyclables into the energy supply chain. Low quality products will in the end not be able to compete on price with waste supplied for energy production and industry needs to ensure that it produces high quality recyclate that can command a price commensurate with its overall cost base.