In July 2017, China notified the World Trade Organization (WTO) that it intended to ban 24 categories of solid waste from being imported to protect its “environmental interests and people's health”. Coming into effect at the beginning of last year, the restrictions laid bare the unsustainable economics behind the UK’s management of its waste. Like much of the western world, the UK had slipped into a reliance on China to deal with its growing waste burden, using a ‘collect, sort and export’ model to shift its rubbish out of sight and out of mind. For years, it was easier (and cheaper) to ship millions of tonnes of paper, plastic and other waste around the world than to develop the capacity to process it at home.
While the ban was undoubtedly a shock to the system, it should not have come as a surprise that China’s willingness to host the world’s waste was coming to an end. ‘Operation Green Fence’, initiated in 2013, was the first step in cracking down on imports of contaminated waste. Now China is refusing to accept any scrap imports that contain more than 0.5 per cent impurities.
Where to next?
China was formerly the number one destination for the UK’s plastic packaging waste, taking two-fifths of our plastic exports in the first quarter of 2017. But after the new rules were imposed, this collapsed to just 3 per cent a year later. With a glut of material, recyclable commodities prices plunged. Exports were initially redirected elsewhere within Southeast Asia to countries such as Malaysia, Thailand and Vietnam. Some recycling operators in China even moved their operations to these nearby countries to recycle the material and export it back to China.
However, overwhelmed with the deluge of material, inadequate infrastructure and the emergence of less sophisticated operations, these countries quickly decided that they, too, did not want to become the dumping ground for richer nations. Some even went as far as sending contaminated shipments back. Within six months of China’s ban, they began to tighten their own regulations – Thailand is set to halt imports of all foreign plastic scrap by 2021. As of mid 2019, Turkey is currently the most significant export market for the UK’s recovered plastic, accounting for almost a quarter of our exported plastics.
Is the answer closer to home?
Export options could become more limited still. Coming into effect from the beginning of 2021, the recent amendment to the Basel convention will see international regulations tightened. In May, more than 180 countries agreed to restrict shipments of plastic waste without first obtaining permission from the destination country. As sending waste abroad becomes increasingly complex, there is scope to rectify chronic underinvestment in domestic recycling capability.
Peter Clayson, external affairs manager at packaging company DS Smith (SMDS), believes “we should never have reached a situation in which UK material was too contaminated to leave our shores”. He sees China’s ban as a “wake-up call” – an opportunity for the UK to rethink its waste management strategy.
Waste management company Biffa (BIFF) has called for a ban on the export of waste plastics, which its chief financial officer, Richard Pike, believes has created an unfair playing field. “The vast majority of PET [polyethylene terephthalate] bottles are currently being exported,” says Mr Pike. “If they weren’t able to be exported, then there would be a clear economic case for people to invest in plastic recycling.”
That economic case hinges on creating sufficient demand for recycled materials that justifies pouring large amounts of capital into long-term projects. Dr Adam Read, external affairs director at Suez's (EPA:SEV) UK recycling and recovery business, points out that while Suez has committed investment to material processing infrastructure in continental Europe – it recently opened a state-of-the-art packaging sorting facility in Germany – it has hesitated to do so in the UK, where “it has been all about ‘cheap and cheerful’ and exports”. To convince Suez to deploy capital, Dr Read says it would require a “long term policy environment where we can see that recycled content is not going to be a whim that disappears”.
The UK government certainly seems willing to oblige. Under its new Resources and Waste Strategy, the government is considering introducing a tax on plastic packaging with less than 30 per cent recycled content from April 2022. If enacted, this would create a definite step change in demand from manufacturers for recycled plastic. Even the threat of a plastic tax is emblematic of the recent shift in attitude and more serious attempt to tackle our plastic waste problem. The ‘Blue Planet’ effect has been credited with concentrating consumers’ minds and triggering changes from governments and corporations. With members including the likes of McDonald’s and Coca-Cola, the UK Plastics Pact is targeting 100 per cent of plastic packaging to be reusable, recyclable or compostable by 2025.
Some waste management companies evidently now feel confident enough in the outlook to invest in expanding capacity. Biffa already opened the world’s first commercially available food-grade high-density polyethylene (HDPE) processing plant in 2008 – it estimates its recycled plastic is used in 85 per cent of plastic milk bottles in the UK. Seeing further potential in this space, it has upped its investment in a new PET plastic bottle recycling facility to £27.5m, bringing its combined plastics processing capacity to around 120,000 tonnes a year.
Pennon’s (PNN) waste division, Viridor, is also banking on a boom in manufacturer demand for recycled plastic, aiming to move up the value chain with a new £65m plastic processing plant in Avonmouth. Expanding capacity by 80,000 tonnes, the majority of its plastic recyclate currently sold to third parties will be processed internally, with the reprocessed plastic estimated to be worth double the input material.
There are potential hurdles ahead as ‘virgin PET’ (new plastic) has become cheaper than recycled PET. This has been driven on the one hand by the US shale boom pushing down the costs of new plastic production, but also greater demand for recycled plastic amid tighter supply. While this will probably test companies’ commitment to sustainability, Peter Sainsbury, chief economist at the Waste and Resources Action Programme (WRAP), believes the looming plastics tax should keep companies “looking forward”. Analysts at S&P Global Platts are similarly sceptical that suppliers will make the switch to virgin plastic. “It may prove difficult to reverse big brands’ decisions about increased recycled content, set to last over many decades, just because of poor economics over a relatively short time frame.”
All fired up
One area of waste management where companies have had the confidence to invest is in energy from waste (EfW) facilities, which burn waste to produce electricity and heat. According to waste and bioenergy consultancy Tolvik, while just over a third of potential additional capacity is being developed by already active players in the UK EfW market, more than 50 per cent is being advanced by parties with no prior experience. There were 47 EfW facilities operational or in late commissioning at the end of 2018, up from 33 in 2014. A further 15 plants are currently being built.
While the environmental impact of these facilities may be questionable, the economics are more straightforward. Enjoying a 20 per cent market share, Viridor has seen underlying cash profits from its EfW operations jump from £34m in 2015 to £155m by 2019. Anticipating an annual gap of 7m tonnes between combustible waste and EfW capacity until 2035, it is looking to open three more facilities.
<title>The impact on recovered material prices:<title>
The effective closure of the Chinese market saw the price of lower-quality recyclable materials plummet. The main recovered plastic to be affected was low-density polyethylene (LPDE) film, the price of which fell from £350 a tonne in January 2017 to £180 a tonne 12 months later. The impact on mixed paper was even more dramatic, with prices falling from a little over £100 a tonne when the restrictions were announced to as low as £10 a tonne in March 2018. While paper prices remain depressed, plastic prices have seen a recent uptick, supported by the package recovery note system (in a nutshell, a certificate showing that waste packaging material has been recycled).
By contrast, higher-quality plastics – the ones now in demand from manufacturers – have seen their value increase, with natural HDPE bottle prices rising from £360 a tonne in early 2017 to £560 a tonne in September 2019.
