The coronavirus outbreak is hitting the vulnerable recovered paper sector hard according to The Recycling Association.
Over the past few years, the international market for recovered fibre has received a number of blows and this has proved challenging for the UK in particular.
Firstly, the closure of Chinese markets for mixed paper and gradual reduction in quota for cardboard (OCC) and sorted office waste (SOW) has largely taken away the UK’s most significant buyer. Other markets such as Indonesia, India, Vietnam and Malaysia have taken up some of the slack, but not nearly enough to replace the tonnage that used to go to China. The implementation of tougher quality and inspection standards has meant mixed paper is currently unviable into Indonesia and India. With mixed paper underpinning council kerbside collections, a significant revenue stream is at serious risk of disappearing and we do not want local authorities to lose revenue from other paper grades either if the export market becomes tougher to access.
Secondly, although vast improvements have been made, some poor-quality material is still being provided from domestic collections and this risks paper having nowhere to go as markets close. International markets are increasingly introducing tougher inspection regimes and won’t accept poor quality material from the UK.
Now, the coronavirus is making a difficult situation even harder. This is because container availability has become tough, generation of paper is lower due to less people shopping and more people working from home, plus it is causing uncertainty for the industry of what the outlook will be like over the coming months.
It has become much harder to find containers to ship material to Asian markets such as Indonesia, China, India, Vietnam and elsewhere as boxes are stuck at Chinese ports when there was already disruption due to Chinese New Year in February. With shipping lines increasing container prices, there is a risk that this will be a knockout blow leading to lower prices in a market suffering from painfully low prices.
With people also shopping less and more people working from home, members of the Association are reporting that there is less material around to trade, even if they can find haulage and containers to get it recycled.
Plus, there is massive uncertainty about how coronavirus will develop and what this will mean for an already struggling paper recycling industry.
The Recycling Association chief executive Simon Ellin said: “The UK recovered paper sector is in a bad place at the moment. Mixed paper is now pretty much a gate fee material, and other grades of paper are all seeing falling or very low prices. Prices look set to fall further due to higher container rates being set by the shipping lines. Several companies are already investigating options for outside storage for the material on the assumption that they won’t be able to move all of their recovered paper.
“Plus, inspection regimes from the UK and international inspection agencies continually get tougher. While quality has vastly improved, it hasn’t improved fast enough to prevent markets from closing or rejecting poor quality material. We warned of this risk when we launched our Quality First campaign, and local authorities, retailers and manufacturers all have to play their part to ensure that we present a quality commodity to the international market.
“In the UK we import much more paper and cardboard than we manufacture, so we have to find international markets where it can be recycled in a sustainable and economic way.
“But we also need more Government support. In the medium-term, we would like the Government to help us develop UK pulp-making capability from recycled paper. It looks increasingly likely that international markets for paper and cardboard will become harder to access, but clean pulp made from recycled fibre will have a market. This will require the Government giving tax breaks and investment subsidies to companies willing to invest in this pulp-making capacity. The export market won’t disappear entirely, and has a vital role to play, but we need to look at alternatives for significant volumes of tonnage that once went to China as it is clear the paper market has changed markedly over the last couple of years and isn’t going back to how it once was.
“Beyond that, we need the Government to show its circular economy ambitions by putting in place a strategy to increase UK paper-making capacity. Too many mills have closed in the last 20 years or so, and we need them to be replaced soon with state-of-the-art facilities. We will always need an export market as part of a global circular economy. If boxes are manufactured abroad to protect our products, it is only right we send them back to be recycled. Increased pulp production has to be part of that, but we need to close the gap and ensure more paper and cardboard is manufactured in the UK. We also need pull measures such as guaranteed public procurement, public subsidies for energy and tax relief to attract investment.
“Finally, the Government should consider a temporary, lighter touch regime on regulation because of the coronavirus situation. We need to be able to move material, but we might also need to store it until we can return to normal. This means there should be a lighter touch on site licenses and a general softer touch from the inspection agencies.
“These are extremely challenging times for the UK recovered paper and cardboard market. We have been through very tough times before, but we need help from all stakeholders to ensure we thrive in future.”