RECYCLED MATERIALS MARKETS



HERTFORDSHIRE COUNTY COUNCIL

WASTE MANAGEMENT CABINET PANEL

TUESDAY 10 FEBRUARY 2009 AT 2.00 P.M.

RECYCLED MATERIALS MARKETS

Report of the Director of Environment

Author: Matt King, Senior Waste Manager Tel: 01992 556207

Executive Member: Derrick Ashley (Planning, External Relations and Waste)

1. Purpose of report

1.1 To inform the Panel about recent market trends in recyclable materials collected at Household Waste Recycling Centres (HWRCs) and discuss the potential implications for the County Council.

2. Summary

2.1 The County Council currently provides a network of 19 HWRCs at which residents can dispose of their own household waste. The centres provide an extensive range of recycling and composting services and, the individual materials collected are a commodity to be traded, much like any other on the world market today and, as such, prices paid and received for the materials can fluctuate.

2.2 The majority of the recycling disposal contracts for the HWRC service expired in 2008. Therefore, a significant amount of document preparation and tendering was required to ensure the services could continue without disruption. The contracts were all appropriately advertised, Pre-Qualification Questionnaire’s issued and tender documents completed on time for submission to the Council for evaluation. All new contracts commenced, between April and October 2008, without disruption to the residents of Hertfordshire.

2.3 The recycling contracts provide the County Council with surety of collection and legitimate treatment and ensure stability in the recycling services made available to residents.

2.4 The timing of tendering for the majority of the contracts has proven favourable given the uncertain economic climate and subsequent dramatic reduction in the prices paid by re-processors for some materials since contract award.

2.5 A summary of the financial effects of the procurement show an annual saving in the region of £50,000 over the next 3 to 4 years.

3. Recommendation

3. 1 That the report be noted.

4. Background

4.1 Textile recycling: While selling second-hand clothes in the UK is still an option, especially through charity shops, increasingly clothes are exported for sale in Eastern Europe, Africa and the Middle East. In addition, material which is not used for clothing can often be turned into wiping cloths. In the UK, the second-hand trade has suffered from the duel problem created by the expansion of cheap clothing shops, discouraging people from buying second-hand clothes while meaning clothes can be less durable when they do eventually enter the second-hand market.

The prices paid for textiles appear to be relatively unaffected by the economic downturn. Material collected by local authorities in the South East of England remains the most sought-after, attracting prices at the higher end of the range. The textiles from Hertfordshire (circa. 1,500 tonnes p.a.) are collected and transported for sorting in the West Midlands. The contract has been let for three years with an approximate increase in income of £25,000 per annum on previous contracted rates.

4.2 Wood recycling: The economic downturn, and in particular the decline in new house building, has reduced the market for chipboard with the knock-on effect that re-processors are setting higher quality standards, in turn increasing costs to local authorities for disposal of their wood waste.

The Hertfordshire contract is set at a very competitive rate for 4 years, saving approximately £25,000 per annum. The facility to receive ‘dirty’ wood i.e. chipboard, from the Centres is thought to divert an additional 5,000 tonnes of biodegradable waste from landfill per annum. In time, this will represent significant savings to the authority as the level of the landfill tax increases and will contribute positively to the overall target for the County Council and the aims and aspirations of the Hertfordshire Waste Partnership.

Wood recyclers appear to be learning the lessons from other recycling sectors where supply and demand and the price of materials has been controlled by a limited number of large purchasers. There is innovation taking place and the development of new markets for recycled wood such as landscaping, animal bedding products and as a fuel for dedicated biomass plants for heat and power production.

4.3 Plastic bottle recycling: Recycling of plastics centres upon bottles which range from milk bottles to soft drink bottles. Plastic wastes such as meat wrappers and yogurt pots are not collected as there is as yet no viable recycling route. European targets for recyclable packaging will rise this decade and so more material will need recycling. Because waste plastics usually have a high calorific value there is considerable debate over whether or not the best route for some plastics is incineration for energy recovery rather than recycling.

The plastic bottle market has been one of the worst hit, with prices paid for mixed bottles dropping from in excess of £200 per tonne to zero in a matter of weeks with some reprocessors even charging for collections. The recently let contract for Hertfordshire is linked to a price indicator and so, although income for the material dropped significantly, the collections for recycling continued uninterrupted. The prices received for the first six months of the year were higher than anticipated and have compensated for the current decline in prices. The plastics recycling industry has shown signs of recovery in recent weeks with prices increasing with the prospect of stability by the middle of the next financial year.

4.4 Cardboard recycling: The decline in the value of cardboard, as with that of plastic bottles, has been attributed to the sudden fall in the demand for recycled materials that are used for packaging, especially in China, with manufacturers slowing outputs in line with the economic downturn.

Indications are that this is seen by this industry as a short term economic 'blip' i.e. 6 to 12 months. The County Council’s contractors believe some markets have been unrealistically high in recent months and although the 'bubble' has burst, albeit very rapidly, they are still able to secure outlets for materials. They are contracted to receive and process material for recycling for a period of three years, hence, there is little concern that the market will not recover in time for our re-tendering process or that our suppliers will be stockpiling large quantities of material. The income to the authority has reduced significantly from the high levels in September although Christmas is historically a lower value period due to the increased quantity of packaging material placed on the market. Indications suggest that the market is already starting to stabilise at the lower level prior to recovery next year.

5. Paper recycling: The paper from the Hertfordshire HWRCs is collected as part of a consortium arrangement that was recently finalised immediately prior to the slump. The price agreed for the paper is likely to at least compensate for the temporary reduction in cardboard income levels discussed at 4.4 above.

4.6 Glass recycling: The value of this material has shown little change this year and remains one of the most consistent price ranges in the industry. Collections remain unaffected.

4.7 Car and household batteries: Car batteries contain lead that provides income to the Council to offset that paid for disposal of the household batteries. Although fluctuating, the value and quantity collected is not so significant as to adversely affect the budget for the year.

4.8 Can recycling: Although not specifically contracted for, cans from the HWRCs represent a small part of the wastestream (100 tonnes in 90,000) and the risk of failing to find an outlet during a volatile market is seen as acceptable. Although we do not currently envisage any problems with the existing suppliers, we could source alternative disposal outlets at short notice should a problem arise.

5. Financial Implications

5.1 It is now clear that Hertfordshire County Council has made some significant savings as a result of this intensive procurement, summarised as follows:

• Textile recycling: approximately £25,000 p.a.

• Wood recycling: approximately £25,000 p.a.

The financial implications of the overall procurement show a saving in the region of £50,000 per annum in comparison to previous year expenditure.

5.2 These financial implications were taken into account in the preparation of the 2009/10 revenue budget.

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Agenda Item No.

5

INFORMATION REPORT

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