It's a materials world - but at what price?
How are MRF operators coping with the slump in material prices, and does quality matter more than ever now if end markets are to hold up? Dean Stiles reports
"Our research suggests that the market is still quite fragile, but we are noticing signs that it is stabilising, particularly for high quality materials. There have been some early positive signs of prices recovering, for example paper prices are showing a modest recovery. Cardboard is up £10 per tonne, it is still being recycled both through export markets and by UK reprocessors," he says.
WRAP's recovered materials pricing update, published in February, shows steel up £5 and mixed paper up £10 a tonne on the previous month. Aluminium is steady at £425 a tonne, likewise with glass prices which remain the same.
"We're noticing that prices for high quality materials have been more resilient, so those MRF operators that are able to produce the higher quality outputs will be the ones that are most resilient - they have the materials which still attract the higher prices on the market. Plastic bottles, for example, were up £20 a tonne in January to around £80," says Gover.
The slump in prices for recovered materials has triggered a rise in gate fees at MRFs, and reinforced the message that quality of recovered material is all-important. According to Richard Cutts, director of Community Waste, the UK is in a consolidation period but, when viewed over the longer term there is little difference between prices paid for export and prices paid in the UK.
"In the short-term we are in for a lot of pain, but in the medium-term prices will recover and gate fees can ease off in direct correlation to any material price increases," he says.
Meanwhile Veolia Environmental Services does not expect current market conditions to be maintained and predicts strong demand for recyclable materials in the medium to long-term. A spokesperson for the company tells LAWR: "We have commissioned three new materials recovery facilities in recent months with further plans in the pipeline."
Viridor Waste Management is equally bullish and says that it is not surprising that the UK has been particularly affected by the current global manufacturing slowdown given that the nation's recycling collections and exports are at record levels. A statement issued by the company points out: "The positive fundamentals of global demand for quality recyclate materials and the resource management industry remain in place, demonstrated by the stability that has returned to the market in recent weeks."
The company also believes the global economic slowdown with consequent reduced consumption is likely to be reflected in lower recyclate arisings, which will eventually redress the balance between supply and manufacturing demand, restoring stability to the market.
The statement continues: "Commodity market volatility is not a new issue. In order to reduce the reliance on the sale price there is widespread recognition of the need to ensure that material collection and processing costs are recovered, reflected in fair value gate fees."
Part of the short-term pain has been stockpiling waste material. Much of the material stockpiled is low-grade waste previously acceptable for export to China and India. To address this, the Environment Agency has issued guidance on the safe storage of recyclable materials, to help local authorities and their waste contractors during the market downturn.
Interestingly, the EA issued 23 permits during the week commencing 12 January this year compared to 36 for the same period last year. "The value of recyclables may have temporarily fallen, but good quality material is still being recycled, and we haven't seen any significant increase in the number of registrations for extra storage," says Gover.
Veolia has, as a contingency measure, extended its storage capacity at MRFs in line with the general slowdown in the volume of commodity sales. But research by WRAP, conducted before Christmas, revealed little evidence of stockpiling. "Only 5% of the local authorities we surveyed said they were storing materials," says Gover. "The vast majority of materials collected for recycling are still being reprocessed and the vast majority of local authorities we have spoken to indicate that their material is still being accepted by sorting and recycling facilities."
He points out that even at lower prices, it is still cheaper for local authorities to recycle. "Although the price for some lower quality mixed papers has reduced from a previous high of about £70 per tonne to £10 per tonne, that £10 is still preferable to paying an average gate fee of about £53 per tonne to send it to landfill."
Prices for low-grade waste have suffered disproportionately compared with high quality materials and given rise to much of the scaremongering about the collapse in the market for recovered materials. Inevitably, the debate about co-mingled and source-separated collections surfaces in the context of higher prices for quality materials. In the case of paper, prices have been more stable, primarily because most of it is collected on a contract basis from kerbside and similar collection points, rather than bought on the spot market.
Similarly with glass, where very little from MRFs is used for remanufacture because of quality issues. "As far as we know, apart from a small proportion going for export, the vast majority is going into road aggregates and there are questions even from road aggregate people because there is too much plastic and other stuff mixed in," says Phil Hurst, from the community recycling network Cylch, who is also a member of the Campaign for Real Recycling.
This view is echoed by Tim Gent, managing director of Recresco, who says that some of the glass coming out of MRFs is "absolutely shocking". The majority of glass collected by Recresco is from bottle banks or kerbside co-mixed collections, and Gent is critical of many MRF operators for failing to talk to the end markets to assess their needs before specifying sorting equipment.
"We are doing some trials with WRAP and found that if the glass comes out reasonably early in the process, before it gets broken too much, there are no problems. Even if it's badly contaminated, it doesn't matter," he says. "What's happened at a couple of MRFs, to get paper out, they installed crushers to crush the glass and grade the paper out. It looks cleaner but all the ceramics are broken up into tiny pieces."
The company has been trialling crushed glass below 20mm and can take mixes with as much as 5% of glass at 15mm particle size. "But 20mm and 50mm are best, and the more at the 50 end the better," Gent points out, adding that aggregate companies have used much of this finely crushed glass, but this market is disappearing as demand for aggregate slumps and suppliers rely on their own quarries for stone.
Looking to the future, Hurst takes a sober tone, believing the current decline in export markets for low-grade materials, particularly to China and India, may well be permanent.
"From our point of view, it's about the quality markets," he explains. "If a MRF can produce the appropriate quality, it won't have seen a drop in income. If it has been reliant on Far East markets that took lower quality, it will face problems. In the long term, these markets will start to demand quality. If the Chinese increase internal paper recycling by 2% that wipes out all UK paper exports to China. We are a small player and easy to write off."
Dean Stiles is a freelance journalist
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