Time for a reality check

The international market has acknowledged for some while now that the newsprint sector is in decline largely on the back of advances in digital media with the UK having reduced its consumption of newsprint by nearly 50% in the last ten years. This is not a function of a recession, although that has had an impact with advertising revenue dropping, but is more a function of social change.

The recent closure of Aylesford Newsprint is just one more factor the international markets reaction to falling consumer demand. UPM closed 800,000 tonnes of capacity in Europe and 500,000 tonnes has been taken out of commission in India. This market is declining and there is absolutely no indicators of this trend being either halted or reversed.

Having looked at the wider picture we now have to focus on the knock on effects that declining trend will have on the UK and its recycling infrastructure and how those changes will fundamentally affect the economics of what we do and how we do it. Rightly or wrongly many kerbside collection schemes have been set up on the back of the volume and value of the newsprint and that revenue by and large subsidises the collection of the more expensive items such as plastics.

Consumer activity

We have seen over the last few years two big changes in consumer activity with one being the decline in newsprint and the second being the growth of home shopping via internet transactions. This growth in internet shopping has meant that more and more cardboard is being collected from the kerbside but this is still nowhere near large enough to offset the reduction in newsprint which has dropped on average by circa 7% per annum.

These changes give the collector and the processor issues in the fundamentals of value and volume. Currently the end users closures have been so extensive that there is now insufficient capacity available to meet the volume of material being generated and as such the price has reduced dramatically. Going forward, however, as supply and demand move into balance as generation continues to fall, although the price will improve the volume will not be there to provide the overall value needed to economically run some of the collections and the processing facilities.

This is the real crunch point as quality demands will move ever higher, operating costs will increase through labour and energy and volume and value will not be there. This will inevitably mean that the revenue once available through material value will have to be generated though increased gate and collection fees to pay for the costs of the service. We are in for some bumpy times ahead.