LAWR

March 2015 Local Authority Waste & Recycling 13 news analysis agement – winner or loser? "The global market for plastics is one of the more important factors, where strong demand for plastic products cre- ates a pull and value uplift for all pol- ymers. This can also be significantly influenced by local conditions or mar- kets, such as the activity levels and confidence in the Chinese market, or to local taxation and tax incentives, for example." Hayward-Higham maintains that so far "we have not seen the price of virgin polymers follow the oil price, possibly because of buy-forward hedging (fixed contracts) delaying the impact or the flexibility in the virgin polymer supply side adjusting to the price and demand change". Cost of production He asserts that the cost of production is where the price of oil will have an impact on recycled plastic materials. He says: "For virgin polymers, one of the most significant elements of the produc- tion costs is the raw material itself but, for recycled plastics, the cost of produc- tion is linked to other factors. "Cost factors in the production of recycled plastics include collection/ logistics, processing, contamination rates and taxation or incentives, which means that recycled plastic production is vulnerable to lots of factors that do not affect virgin polymers. This creates some disconnect in an already volatile market. "Further to this, there is less flexibil- ity in supply and demand for recycled markets because production tends to be driven at the front end (the amount that people consume and then recycle) rather than by demand from an end user." Hence, Hayward-Higham asserts that, when the current low oil price does flow through to virgin polymer production, subsequently lowering the price, there is a risk for producers of recycled plastics because they will be less able to adjust their production costs in order to remain competitive. Chartered environmentalist Mike Tregent goes further and says prolonged low oil prices and potential for oversup- ply of "raw materials (virgin polymers) would have a significant impact upon competing in those commodity mar- kets" and this "would feed back into the costs of collection, handling and storage, for these materials, meaning that there may have to be some form of economic intervention, if recycling targets are to be met". The winner takes it all? Although oil prices have fallen dramati- cally across the board, it is currently not known when the trend will reverse. However, Closed Loop Recycling man- aging director Chris Dow says that recycled plastics will still remain an "environmental win for everyone" even though virgin plastics may become cheaper to produce. He asserts that "using recycled plastics will always be an environmental win as it uses 50% less energy to produce than virgin resin". Elsewhere, the most obvious way that lower oil prices will help resource man- agement firms will be through cheaper fuel costs for reprocessing and transport. Refuse vehicle firms will be the main beneficiaries. However, although O'Donovan Waste Disposal managing director Jacqueline O'Donovan says that her firm will gain advantage from lower fuel and utility costs, she says "it will only make a small dent in recovering the losses expe- rienced since prices escalated". She explains: "The industry wasn't able to increase its rates in line with oil prices and when fuel increases again, which we fully expect it will, our costs will remain static. Ultimately, the only winners are the oil companies and the Government." Nevertheless, lower oil prices will also bring good news for consumers. Householders may start spending less on their heating bills if they have oil heaters. However, with more money to spend, consumers may start to shop more, accumulate more 'stuff' they do not need and produce more waste. The question is whether they will re-use or recycle this material. The environment could be a loser because of lower oil prices. Media reports suggest that a consen- sus is growing that lower oil prices are here to stay for at least the next couple of years. Greenway Waste and Recycling UK commercial manager Michael Dowd concurs that the market has been "bad at the moment and a bit of struggle" if you "compare this time to the same time last year". All in all, the plastics sector is hurting the most at the moment. Nonetheless, the industry will need to pick itself up and focus on its long-term goals. As PAFA's Barry Turner points out: "We expect prices for polymers to start bouncing back by the end of the year. At the end of the day we still need to meet our recycling targets. They are not going to go away." " Ultimately, the only winners are the oil companies and the Government "

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