And, sector experts have told letsrecycle.com of how on the paper front, mills are busy and that a tightening in markets is expected at some point. But, stronger worries remain in the plastics recycling sector.
Metals
On the metals front, lower arisings are reported. Robert Fell, the new chief executive of the British Metals Recycling Association, said: “With the global reduction in the price of metals and a steep decline in the demand from steelworks, the UK metals recycling sector is naturally suffering. As a result our members are having to offer a lower gate price, which is leading to less metal coming through our members’ yards and, as a result, we are starting to see closures and job losses.”
But, metals expert Tom Bird, chief executive of Mettalis Recycling and UK board member on the ferrous division of the Bureau of International Recycling, told letsrecycle.com that the sector remained resilient in the face of volatile world markets. He said: “The metals recycling sector continues to be a resilient industry although there is little good news about and we are now thinking that the current world picture could be the new norm. We have seen some yard closures in the UK and businesses will have to look at their costs and the potential for diversification.”
However, the Brussels-based Bureau of International Recycling’s American correspondent reported an almost optimistic note in a report last month. George Adams, of SA Recycling in the United States, wrote: “January was a breath of fresh air for US scrap dealers as the New Year started off on a positive note. After seasonal, year-end inventory reductions, a modest uptick in US mill orders created a supply-driven market that saw modest increases in US scrap prices… In January, scrap dealers found themselves in an ‘up’ market for the first time in many months. That was on the heels of another steep drop in scrap prices last November followed by another weak month in December. Although steel mill capacity utilisation remains low (at under 70%), the lack of scrap looks set to keep the market in a slight supply deficit into February and should be supportive of US domestic scrap prices.”
Plastics
In the plastics sector, 2016 has started on an uncertain note with low oil prices continuing to put downward pressure on the price paid for scrap plastics and this is coupled to concerns over demand for material from the Far East.
Manufacturers in China are expected to begin ramping up production in the coming weeks, with the Chinese New Year coming to an end, but it is expected that demand for plastics scrap from the UK and Europe may not be as strong as in recent years.
And, according to Jessica Baker of polythene recycler Chase Plastics, the relatively high value of plastics PRNs has meant that some grades of plastics are still attracting an ‘artificially high’ price.
She said: “In the plastics waste trading marketplace it has become evident that anything that doesn’t attract a PRN is falling in price.
“Engineering grades, for example, are not moving, however, anything supported by the PRN price, those are artificially high, which makes it difficult for anyone producing a pellet. The feedstock prices are high, but my selling price is falling through the floor. That artificial support that the PRN is giving is, to my mind, still a problem.”
Value
Rod Fox, director of Revaluetech Ltd, said that he felt plastics recyclers needed to look at producing products which had a value that would hold good despite market fluctuations. “The products we are making have no relationship to the vagaries of oil price and virgin polymers and getting hold of the raw material is cheaper.”
Mr Fox is involved in the supply of blocks and bollards made from LDPE, HDPE, PP and some styrenes from the post consumer market, which even have trace of foil and paper in the final product. “We make these blocks and bollards currently in Germany and they do not need the expensive washing and other processes that some recycling routes need.”
The materials, which he hopes will eventually be made in the UK, are currently being trialled in sea defence and other work by the Environment Agency on the south coast of England and are said to be cheaper than hardwoods and more ‘sustainable’.
Paper
The paper sector remains more optimistic than metals and plastics with two experts predicting a tightening in the market at some point.
David Powlson, Senior Principal at Pöyry Management Consulting, which has expertise in the paper recycling and mill sector, said: “The recent turmoil in the markets has created a degree of uncertainty, but the most significant macro-economic trend we have seen recently relates to industrial output in China.”
“The oil price is saving a lot of consumers money”
Johan Sundblad
Saica Natur
Mr Powlson continued: “We continue to anticipate a tightening supply-demand balance in recovered paper markets – which can have implications on paper prices. However slower than expected growth of the Chinese economy continues to delay this.”
Commenting from the recovered paper sector, Johan Sundblad, managing director at SAICA Natur UK which operates the UK’s newest cardboard mill in Partington, Manchester, said that he felt there was a need to be pragmatic about the global economic view. “The oil price is saving a lot of consumers money, and is staying in the pockets of people who will have more to spend and this should help drive the economy forward. Yes, it is not good news for the Middle East and the southern states of the US but it is not such a bad thing as people say.”
Mr Sundblad added: “The shops are doing well and so is Amazon – overall retailers are not unhappy and car sales are also up.”
He predicted: “After a few months, it is likely things will be on track. Our paper mills are fully for 2016 and in 2017 there will be a lot of new capacity coming on stream with demand for good quality material.”
Profits
Giving a perspective on world markets, Jacob Hayler, an economist and executive director of the Environmental Services Association, said that volatility “means uncertainty which makes investment harder. Declining stock markets mean that the consensus is for lower future corporate profits.”
Mr Hayler continued: “We seem to be in a world where growth and returns are expected to be lower. This could affect forecasts for future waste arisings, although policy drivers are likely to have a far greater influence on volumes. Of more significance for the sector is the outlook for commodity prices. These are not anticipated to return to the levels witnessed during the huge boom which has now well and truly passed. This means a continuation of lower revenues for outputs and a greater reliance on gate fees to cover processing and treatment costs.
“Given this context, what we really need is a stronger vision from government for our sector. A new resources strategy for England could give the clarity the industry needs to overcome these broader economic headwinds and invest in the jobs and growth of the future. Inaction will only lead to an investment hiatus and a huge missed opportunity for the UK.”
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