Potential of higher MRF gate fees raised

Storage of materials was starting to take place at some sites with waste paper merchants looking to move material and waste companies continuing to move large volumes but also storing some material at their materials recycling facilities.

Colin Price, group managing director for Nordic Holdings, which is thought to have the UK's largest waste paper handling site, in Kent, spoke of the collapse of market prices.

Mr Price told letsrecycle.com that he believed the materials recycling facility (MRF) sector in the UK “will be hit harder than the merchant sector, as it relies on the aggregate sale of its recyclables, being the commodities in co-mingled collections once segregated.

“These sales values have collapsed, and the only way to recover the losses now felt, will be to dramatically increase gate fees to local authorities, which will in turn pose a problem for those with fixed pricing, which will be immediately unsustainable,” he added.

Gate fees

And, Mr Price forecast that “we could see the gate fees exceed landfill costs in some areas, which will be a challenge for recycling targets. Those in the industry that believe we are in a 'blip' that will correct in a couple of months are not examining the impact of global recession on the UK's almost unique exposure to export markets for its recyclable sales.”

Local authorities

Similar views about gate-fees were expressed to letsrecycle.com by one senior local government waste management officer who chose not to be identified.

He said: “There may be some contract negotiations now between local authorities and waste companies. My worry is that at the end of the contract periods the contract rates could change substantially with MRF gate fees rising. At present our contracts are usually risk-averse for the local authority but I fear this will change as contractors have to recover more costs.”

Kenton Vigus, waste manager for Lincolnshire county council, said: “I think at local authorities now we are wondering how long this fall in the market will go on for. If it is short-term then there is not so much of a problem. In the long-term if it continues will face difficulties. Just how long it goes on for, to be honest, is what we are all worried about.”

Paper view

Concerns about the current situation have been expressed to letsrecycle.com by one of the UK's most experienced waste paper firms, Perrys Recycling.

Chairman Brian Perry has written to environment minister Jane Kennedy saying that over-strict regulation by the Environment Agency is stopping legitimate exports of high quality material to the Far East with an acceptable amount of non-paper material.

Mr Perry also told the minister that the funding given to the Waste & Resources Action Programme (WRAP) would be better spent on supporting the creation of new domestic paper mill capacity.

Waste industry

Among the waste management companies, SITA UK confirmed it was storing some material but was also managing to move most material, with mixed paper particularly challenging.

However, the UK's largest waste management company, Veolia Environmental Services, said earlier this week (November 10) that “at the moment we are not prepared to say anything at all”. Later, a spokesperson for Veolia ES, which has a large number of MRFs, including several in Hampshire, added a more optimistic note: “We do not expect the current market conditions to be maintained for a significant period and expect there to be a strong demand for recyclable materials in the medium to long term.”

Shanks managing director, Ian Goodfellow, told letsrecycle.com that, because it had established contracts, the company was still moving material but “suffering like the rest of the industry” with lower prices.

Mid UK Recycling, which has a MRF in Lincolnshire, said: “The fall in commodity prices has affected all businesses in our sector. However, efficiencies gained from our recent investment in the development of new specialist processes, like our 100% plasterboard recycling service, automation in areas such as household recycling and continued focus on quality, are enabling us to face the current economic downturn with confidence.”

Meanwhile, a spokesman for Viridor Waste Management acknowledged that, with commodity prices having dramatically fallen, “access to markets been severely curtailed for recycling and waste management companies and local authorities.”

However, he explained that: “Viridor's established marketing strategy and end-market relationship have thus far ensured market access continues and stock building has not been necessary.”

Viridor also believes that a prolonged economic downturn is likely to reduce consumption and, as a result, the levels of recyclate produced, to “eventually redress the balance between supply (collections) and manufacturing demand, restoring stability to the market.”

Outlining the action Viridor believes should be taken next, the spokesman said: “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' (under current conditions these cannot be offset by material sales revenue).

“Options such as stock storage for non-perishables – where fire risk is mitigated – may be considered via licensing exemptions, but will not address the issues faced other than in the immediate term,” he added.

And, striking a positive note, the spokesman concluded that: “The positive fundamentals of global demand for quality recyclate materials and the resource management industry remain in place.”