The UK’s fledgling plastic reprocessing industry is confident that it can weather the brunt of the recession as retailer demand for food-grade recycled materials remains strong and prices for commodities begin to stabilise.
However, it is proving difficult to get bank finance for additional plant.
Prices for recycled material fell sharply in mid-October in response to a drop in demand for material, especially from China. This was especially true for mixed plastics, prices of which dropped from £180/tonne to £40/tonne in a month. Prices for virgin materials have taken a similar path.
Yet there are signs that prices are beginning to stabilise (see graph) and a clear picture is emerging of the impacts on domestic sorting and recycling firms. Many of them report that while domestic markets are squeezed because of the recession they remain "healthy and enduring" for good quality material.
The plastic recycling sector is a growing one, particularly for food-grade plastics. In the past few years there have been a raft of announcements signalling growth in domestic capacity.
Lincolnshire-based Alternative Waste Solutions is expanding its 25,000 tonnes per year plastic bottle-sorting facility in North Lincolnshire into a plant capable of sorting 100,000 tonnes per year. J&A Young (Leicester) Ltd, which trades as JayPlas, recently opened a 78,000 tonnes per year plant in Derby capable of separating all plastic bottle polymers before cleaning and extruding them into pellets. Other recycling plants under development include a 10,000 tonne capacity plant by WES Recycling in Redcar, a 20,000 tonnes a year facility in Shropshire by JFC Plastics, and Intercontinental Recycling Limited’s 30,000 tonnes per year facility in Lancashire.
Many of these firms remain sanguine that market conditions will not limit their plans. "I’m optimistic," said Jonathan Short, managing director of AWS. "We need volume and we need a margin. The volume is there and the margin, although slightly squeezed, remains healthy and viable."
Chris Hanlon, group commodities manager at WES Recycling, said that while last year’s market conditions "had a massive effect" on the firm, it too is continuing with plans to build a new plant. "It won’t stop us doing what we are doing. We are just going to have to react to market prices and adapt."
Closed Loop London, which already runs a plastic recycling plant in Dagenham, East London, said it was still working to identify an additional plant capable of processing 50,000 tonnes of high-density polyethylene (HDPE) and polyethylene terephthalate (PET) a year. It hopes to announce the site in Wales before the end of the year.
"The demand for material is still out there [from supermarkets]," said Chris Dow, the firm’s chief executive. "Consumers have embraced products and packaging containing recycled PET and HDPE and retailers are responding. The fact that the price of virgin PET has reduced is not an ideal situation, but that hasn’t reduced demand. Environmental factors are still at the fore of our minds."
Indeed, WRAP’s market development manager Marcus Glover said retailers were frustrated that there is not as much recycled PET as they want. However, he warned that it was unlikely this demand will be met in the short-term: "We’re expecting financing to be a lot more difficult and it will be harder for new plants to come on stream. But while the banks are skittish over funding, venture capitalists are continuing to invest."
Mark Burstall, chairman of the BPF Recycling Council - a plastic industry trade group - agreed that future investments will be difficult, as did several of the firms contacted by ENDS.
The recession has not just affected recyclers of plastic bottles and consumer packaging. Firms running facilities handling mixed plastics from waste electrical and electronic goods struggled to sell their material at the end of last year, according to sources. Markets however remained open for single polymers from WEEE.
The market for mixed WEEE plastics has picked up since the New Year but facilities are still producing more material than they can sell, according to one facilities manager who asked not to be named. These sites will store material until prices recover. But he said the situation was "a bit of a pain rather than a tragedy" and insisted there was "no sense of panic". Recyclers selling into the automotive sector have also seen their markets dry up. Chris Hanlon of WES Recycling said the amount of material bought by automotive suppliers had dropped dramatically.