By Mike Ritchie, MRA Consulting Group
It has now been over a year since China introduced its National Sword policy to restrict the importation of kerbside recyclable materials from the rest of the world. The purpose of the policy was to increase the recovery of domestically generated recyclables within China and further boost its own manufacturing. The new rule is a 0.5% contamination rate in Australian exported material. Few Australian Materials Recovery Facilities (MRF) were built for that level of purity.
Of course the effect was a crash in the prices paid for baled recyclable product such as that produced by Australian households via their yellow top recycling bin.
That led to calls for improvements to Australian recycling, reductions in contamination and a move away from international markets for recyclables towards domestic reprocessing of materials. Of course that implies an increase in costs to Australian households.
So, 12 months on, what has changed?
Firstly, local governments have stepped up to the plate to support the continuation of kerbside recycling. With the fall in commodity prices MRF operators were at risk of going broke. Many councils are now paying higher fees to their MRF operators to cover the loss of revenue from product sales.
By and large that has staved off a crash in recycling and so far we have not seen any MRF operators going into liquidation. Anecdotally a couple went very close.
We have seen a number of MRF sales as operators exit the sector to be replaced by new entrants who view a brighter future involving more reprocessing (more later).
Secondly, there has been an increased push by some councils to educate the community on the economic and environmental costs of contamination in the recycling bin. In my view not enough, but some. While any reduction in contamination is beneficial to the MRF operator, it does not necessarily translate into a reduction in export contamination levels. That depends more on the design of the MRF.
So thirdly, we have seen MRF operators invested in additional sorting technology such as optical sorters for plastic, “bounce conveyors” and disc screens to separate cardboard and mixed paper, additional magnets for steel, and also additional workers to manually separate the contaminants. This comes at a cost. The MRF operators need to be congratulated for the speed with which they have tweaked their operations to reduce export contamination rates.
Which brings me (fourth) to a couple of State governments which have put up capital to support short term MRF improvements. These are Victoria, South Australia and NSW (albeit much of the NSW monies were not new and had already been allocated to local councils. This has left many MRFs short). Other States have done little.
Fifth, MRFs have swapped the export destination from China to Indonesia and a number of other Asian manufacturing countries. But Indonesia has become our main market.
And that is the summary for one year on. Lots of short term adjustments to keep the lights on. The China contamination limit mostly affects mixed streams such as mixed fibre (paper and cardboard) and mixed plastic. MRFs that produce separated streams for example cardboard, grade 6 newsprint, HDPE plastic bottles, PET plastic bottles, tend to have been less affected because the prices of these segregated streams have held up. The big price fall has been for the mixed streams. Small “mini MRF’s” that mainly produce mixed product streams have suffered the most. But so far none have gone broke.
So in short most recyclable product is still being exported, albeit at lower prices. There has been very little landfilling of product. Very few councils have stopped collecting (though a couple threatened to stop). There has been little stockpiling of product (except glass; more on that later) – it is costly to stockpile materials and sites would fill up very quickly.
But that is short term. The risk is that the other Asian economies will also begin restricting imports to grow their own domestic waste management systems. Vietnam for example has introduced similar controls.
In the medium term we must “on-shore” the secondary reprocessing of fibre and plastic. I hold to the view that secondary reprocessing (such as the sorting and extrusion of plastic into pellets) will still rely on export markets for the product. Australia simply does not have sufficient tertiary manufacturing capacity to consume all of our recovered materials. That is not to say we should not support both the secondary reprocessing and the tertiary reuse of these materials locally. We should. But to expect a complete closing of the loop domestically is asking a lot (and will be more expensive).
So the next phase must be the establishment of plastic reprocessing plants (about $10m each) and fibre reprocessing (upwards of $50m) if we want to de-risk and decouple Australia’s recycling system from fluctuating international commodity prices. My view is every domestic plant we build takes some risk away from the system. The more the better.
A quick note on glass. Glass (which was not exported nor affected by China) has its own problems because demand for glass for bottle making has fallen in Australia. Australian bottle makers are increasingly obtaining higher quality glass from Container Deposit Schemes (ACT, NSW, QLD, WA, NT, SA) and are depending less and less on MRF glass. So we are seeing many MRFs migrate towards producing “glass sand” for road base, pipe embedment and asphalt making. This is costly but a lot less costly than landfill. There are stockpiles of glass and glass sand across Australia largely as a result of limited markets for the finished product. The call has gone out to councils and State governments to preference glass sand (and other recycled materials) in their project specifications.
The Australian Council of Recyclers (ACOR) produced a report for the Federal Government that said $150m would largely de-risk Australia’s recycling system ($30m MRF improvements, $60m plastic, glass and fibre reprocessing, $30m community education and $30m positive procurement to create the local markets (Declaration: with MRA advice)). The Federal Government is reviewing its ongoing role in supporting these initiatives as part of a push towards the “Circular Economy”.
The walk away messages – Governments need to lead. Industry will invest. Councils and communities will support. Recycling is too important to fail. From a resources, climate change, energy, economic, community or employment, point of view, it is too important to fail. Saving means de-risking. There are simple and cost effective solutions. The Meeting of Environment Ministers (MEM) must lead.
As always, I welcome your feedback on this, or any other topic on ‘The Tipping Point’.
Update 21/2/19: Since this article was written, the Victorian EPA has temporarily closed down the three SKM MRFs in Melbourne making the need to risk proof kerbside recycling by on-shoring secondary reprocessing even more urgent.
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