Invest wisely to build the waste management facilities of the future

Written by: Trevor Smart | Published:
Trevor Smart, UK & Ireland country manager at Bollegraaf Recycling

It is true to say that the waste management sector has always been at the mercy of ebbs and flows in recycling materials pricing, especially through changes in commodity prices such as oil.

However, the impact of the National Sword by China is likely to be a genuine watershed. The UK recycling industry will never be the same again.

Experience shows that when faced with significant changes in pricing, or a requirement for improved quality at a time of low demand, businesses usually try one of three options: reduce overhead costs, shut down altogether or, most likely, invest to enhance quality.

Given the current significant changes facing the sector, we are already seeing some companies investing in an attempt to deal with the immediate issues they are facing, but are they investing wisely?

Simply ‘throwing money at the problem’ has always been a risky strategy. You may only be tackling today’s immediate problems and further investment may well be required as the market consolidates after such a period of dramatic change. The net result, of course, could require not one but a series of smaller investments – potentially just to stand still. We are also seeing a number of better-performing MRFs taking the output from poorer performing plants and turning it into better-quality output.

What we are witnessing is a genuine paradigm shift in international recyclate trading, which is likely, given the dynamic nature of the markets, to generate a series of adjustments over the next few years. As a result, it may be far wiser to build greater resilience and flexibility into recycling facilities.

So, there could be a genuine argument that if you are going to invest, invest big – to not only produce very high-quality materials but also to present economies of scale. Effectively, the over-engineering of today’s MRFs would ensure that they not only cope with today’s issues, but will put them in a far stronger position to deal with an uncertain future.

Such a ‘great leap forward’, to recycle a Chinese expression, requires a strong belief in your chosen equipment and a clear vision of what you think your plant will need to be able to do over the next 10 years or so. Of course, it is difficult to predict the way the markets will develop; however, with such a proactive approach, plant owners can have the confidence of knowing that their investment will be secure for the foreseeable future. A larger investment will generate greater returns for a longer period than a series of smaller investments could ever achieve.

In the United States, for example, investment in mega MRFs has allowed the industry to cope with no landfill tax and low gate fees while remaining profitable. To ensure the maximum return on investment, these MRFs keep a consistently high throughput.

In these uncertain times, it is important to remember that China’s National Sword will not kill off recycling in the UK. It is clear that effective resource management and the circular economy are here to stay; we will still be recycling materials in 10 years time.

Those companies most likely to come out of the current chaos best, and be well positioned to profit the most, are those that have greater flexibility for the continued production of larger volumes of high-quality recycled materials, whatever the future may bring.

Trevor Smart is Uk & Ireland country manager at Bollegraaf Recycling

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