Revised written evidence submitted by the Recycling Association

Founded in 1975 to represent independent recovered paper merchants, the Recycling Association today represents more than 80 UK recycling organisations. We are the largest network of independent waste and recycling operators in the UK with a combined annual turnover in excess of £5 billion. 

Together, The Recycling Association's members provide recycled material to re-processors in the UK and across the world. This allows manufacturers to use sustainable recycled materials, reduces the amount of needless landfilling and cuts reliance on single use commodities. Furthermore, our members make a substantial contribution to the United Kingdom's balance of payments.

The Recycling Association's aim is to support UK recycling, maximising both material quantity and quality.  We work at regional, national, European and international levels through lobbying, campaigning, developing relationships and opportunities and supporting members with best practice, operational or legislative advice. 

We recognise that quality represents an ongoing challenge for the recycling sector. We believe that achieving high quality recycling outcomes is the responsibility of the complete supply chain, from householder through to purchaser. Our Quality First campaign seeks to make it easier to achieve our quality goals.

We welcome the opportunity to assist the Environmental Audit Committee's Inquiry on the recent Chinese waste import ban, a topic which we have been following very closely and are uniquely placed to comment on.

How much waste within the banned categories does the UK currently export abroad, and what proportion is sent to China?

• In terms of paper fibre (carboard, newspapers, magazines, food packaging, office papers etc), in 2016 the UK collected c. 8 m tonnes per annum for onward recycling of which just over 60% was exported. Just over 47% was exported to China. Circa 15% is exported to other markets such as Europe, India, Vietnam and Indonesia.
• Of paper fibre exported to China, c. 2.4 m tonnes is cardboard (OCC – old corrugated containers) and just over 1 m tonnes is mixed papers. Mixed paper is the material typically collected at the household and includes newspapers, magazines, food packaging and office paper and is now completely banned for export to China.
• The Recycling Association does not have access to accurate data relating to plastics exports to China.

What short term and long term issues will the Chinese ban create for waste management and recycling in the UK?

• The UK was effectively given 6 month’s notice by the Chinese authorities of the changes which have now been implemented – 6 month’s notice to find new markets for significant volumes which have been shipped to China for c. 2 decades. In addition to the total ban on mixed paper and all post-consumer plastics, is the increased restrictions on "non-paper" components in cardboard imports, down from 1.5% to 0.5%. This is by far the most stringent standard in the world and goes much further than the levels applied by the global papermaking industry. For example, the European standard contained in EN643 remains at 1.5%. However, the UK recognises the importance of quality and recent inspection and sampling data would indicate that most UK suppliers into China are now already meeting this new specification. This should be recognised as a real positive for ongoing UK exports to China in the context of continuous improvement and the UK’s position

• Related to the ban and the changes in standards, and another major problem potentially facing the UK, is that China has not yet issued full import licenses for cardboard for 2018. Previously, they were fully allocated on an annual basis but more recently have been allocated on a quarterly basis. However, at the time of writing, only an initial 2.3 million tonnes of allocation was made for global suppliers in total,  i.e, 10% of the normal worldwide exports to China. Further allocations have been subsequently made, but there still remains great uncertainty as to China’s intentions for the rest of the year and it is reported that if China released the same amount in the last three quarters of this year, they would have licenses to import 16.8 million tonnes for the year – down 35% on 2017 imports. We know that China plan to stimulate their own domestic collections, so this small allocation so far, is very concerning. To date in 2018, apart from orders which were placed in December 2017, 2 of the 3 largest Chinese mill groups have not bought spot tonnage (non-contracted or regular) from the UK in 2018. This is unprecedented.
• There are other markets for materials – internally within the UK, Europe and Asia. Mixed papers and plastics have not been shipped to China from the UK since October 2017 as they would have arrived after the January 1st 2018 cut off. This meant alternative markets had to be found which coincided with a world under supply of fibre, and so these markets mopped up most of the extra volumes available in 2017. It is important to note that the changes in China have been applied globally, and all other world suppliers are trying to feed the same markets as the UK. The US for example export 21 million tonnes of paper fibre each year and, not including the 1m tonnes from the UK, there are also a further 4.5 m tonnes of mixed papers globally which previously were exported to China and which have now entered the world market. Pre-Christmas and now into 2018, these alternative markets are showing signs of over supply and there are already fewer orders available for all materials, and prices are crashing as a result.
• Short term, this has meant that many UK facilities are beginning to carry much higher stocks of paper and plastics than normal and there are great concerns that there will be very few options available from February onwards. There is very little information coming from the Chinese authorities as to their intentions for paper fibre going forward. The UK needs to be alive to the fact that at least in the short-term to medium term, there will be significant shortfalls in global processing capacity. The impacts of this are outlined in the sections below.
• Short term too, there is great concern about how China will apply the new 0.5% limit on outthrow in cardboard. The influential US based ISRI (Institute of Scrap Recycling Industries), have recently reported that following meetings with Chinese enforcement agencies, AQSIQ and CMEP, the Chinese agencies are wholly unprepared for the implementation of the new rules. There is a real fear that this will result in ad hoc inspections with untrained staff which could lead to widespread rejections and the return of consignments back to the UK – this will have huge cost implications for the UK, with the minimum cost of repatriating a consignment exceeding £20,000.
• Not only has Chinese demand helped to grow the UK recycling industry by covering the lack of domestic processing capacity, it has helped to keep the prices paid by processing mills at a healthy and sustainable level. Already, the Chinese ban has led to significant price reductions of c. 70% on mixed papers and c. 40% on OCC. There is a likelihood that, particularly if Chinese import licenses are cut, then prices will fall much further and it is difficult to see, at least in the medium term, how these prices can recover. The over supply situation we are now in means that remaining buyers can control the market and, as these buyers can also cherry pick the best materials in the best locations for them, then some tonnage, particularly the lower quality local authority tonnage will become distressed and prices will collapse. This could have severe long-term effects for local authority collection systems where it may become uneconomic to continue collections and the potential for more pressure on long term PFI contracts with the private sector which is already under strain.
• The reduced number of shipments from the UK to China and the general uncertainty is already having the effect of increasing shipping costs to China – again, this will lead to further downward pressure on prices.
• Long term, there is a real threat to the UK achieving its legally binding recycling targets, and the associated adverse environmental, economic and social consequences which could accompany a backward step in recycling performance.

What are the environmental implications of the Chinese ban?

• Already we are seeing the recovery of materials moving down the waste hierarchy from recycling through to waste to energy incineration and landfill. It is highly likely this will increase.
• As outlined above, there is a possibility that at least in the short to medium term, local authorities may have to cease collections for materials without markets or where the value of the materials make it uneconomic to do so. Where contractual relationships have placed the risks on the waste management companies, Force Majeure contractual clauses could be invoked. Fewer materials collected means material could continue to move down the hierarchy to waste to energy incineration or landfill.
• Many collections and or the sorting of commercial and industrial recyclables have already stopped – for example low grade plastic films.
• Materials that are still collected for recycling and which are currently being stored because there are no markets for them eg low grade plastics, may have to be incinerated with energy recovery or landfilled.
• The exporting of materials to China is a robust circular and sound environmental model. The UK imports vast amounts of goods from China which are packaged in cardboard and plastics using recycled materials. The UK then exports this packaging back to China on the vessels the materials arrived in and which otherwise return to China empty – thereby utilising the otherwise wasted transport emissions.  There have been various studies carried out by DEFRA and others which support the environmental benefits of this supply chain. With the China ban, the UK have been forced to look at new export markets and are now sending materials for recycling to countries where the same level of imported goods is not received, so there is a trade imbalance, the model is less circular and less environmentally beneficial. The Vietnam market is a good example of this.
• The impact on public confidence and the longer term effect this ban has on the environment should not be under estimated without intervention.

What preparations has the UK Government made ahead of the Chinese ban and are these preparations sufficient to deal with the degree of change the ban will cause?

• The Chinese ban is potentially the biggest problem the UK recycling industry has ever faced and the UK government preparations have been woefully insufficient. The responses of Michael Gove and Therese Coffey to early joint letters sent by UK Trade Associations alerting them to the impact of the changes in China, effectively said there was nothing they could do to influence the impending Chinese intentions.
• The government response per se to the ban has been inadequate and was typified by Mr Gove’s admission at the Environment Audit Committee in November 2017 that he “hadn’t given it sufficient thought”. This is despite a letter that was jointly sent to Michael Gove MP, Liam Fox MP, Greg Clark MP and Mark Field MP by The Recycling Association and the Confederation of Paper Industries on 27th July 2017 which alerted them to the issue.
• After pressure from industry, DEFRA arranged a meeting with stakeholders on 13th September 2017 to discuss the potential impacts of the ban. DEFRA outlined that all dialogue with China had to be via the EC and DEFRA arranged representation at the Market Access Advisory Committee (MAAC). They attended the 28th September MAAC meeting where it was agreed to add the China situation to the meeting on 20th October 2017 in Brussels. This meeting was attended by DEFRA and by Simon Ellin from the Recycling Association. The MAAC committee were sympathetic and agreed to make representation. Since then, very little information has been released by government relating to actions they have taken, although it is understood the British embassy in Beijing alongside the US embassy and others, have held meetings with Chinese agencies.
• At the DEFRA meeting on 13th September with stakeholders, the processing industry asked the Environment Agency if they would relax licensing restrictions on the quantities of materials that can be stored if companies had to temporarily increase stock levels due to the prevailing market conditions. The answer given was that it would be reviewed on a case by case basis, considering health and safety and fire risks. Notwithstanding this, if the Environment Agency are not flexible on storage levels (and considerable local variations exist), then recyclable materials will undoubtedly be either burnt or landfilled – there will be no other options. This will have a significant adverse impact on business viability, local authority collections and the environment.  It would be a damming indictment to the UK's waste policy if quality recyclates ended up being incinerated or landfilled when their economic and environmental potential could have been realised through reprocessing into new products.
• China have outlined their intentions to grow their own internal recycling collection systems by 100 million tonnes by 2019 and this has undoubtedly been a factor behind their intentions to rationalise their imports of materials. However, the situation has also been bought about by the supply of sub-standard materials from across the globe and the UK has been a significant part of this supply chain. 'Voluntary' arrangements clearly have only had a limited impact to date, and despite the substantial investment made by UK industry which has been prerequisite to the UK's ability to address quality, industry cannot be expected to improve quality on its own, without policy and regulatory support. Regulatory levers must be in place from design and collection through to sorting.  The Transfrontier Shipments regime has been a very blunt legal instrument, designed to address and deter criminal activity, and has been largely ineffective in improving quality, which is fundamental to the economic value of the market in secondary materials. The Recycling Association has concerns that other countries will follow China’s example and the UK needs to be in a position to react to this.

Have there been preparations to export waste elsewhere? What degree of control does the UK have over how waste is handled once it has been exported?

• Because there was no guarantee that material would arrive in China before the original 1st January 2018 deadline, the UK ceased most exports of mixed paper and plastics to China in October 2017. The UK looked to develop export relationships in markets such as Europe, India, Malaysia, Vietnam and Indonesia which, coincidentally, was at a time when there were some shortages in global fibre supplies. Therefore, before Christmas, and for material sold long into January, most material found a market, albeit at reduced price levels.
• Mixed papers globally, (including the UK) accounted for circa 5.5 m tonnes of China’s imports in 2016. Therefore, it is not just the UK whom are looking for new export markets, it is the rest of the world too, particularly the United States. For example, reports came out of the US at the end of 2017, that in one consignment alone, the US had shipped 40,000 tonnes of mixed papers to India. The effect of this global scramble for new markets is principally twofold:- Firstly, prices have been forced significantly downwards due to supply and demand principles. Secondly, global markets have quickly filled up and there are now signs, in the middle of January that mills using mixed papers are very full. Reports from the US suggest that they are now carrying very high stock levels and material is getting increasingly difficult to move and is moving to a negative value. The UK tend to be slightly behind the US when feeling the effects of global markets, mainly due to the proximity and availability of Europe. However, Europe too, is showing signs of reaching capacity and it is predicted that, from now and into February and beyond, there could well be some stock piling of UK materials, and materials that do move will do so with further and impactful price reductions approaching zero value at best.
• There is also great uncertainty in the OCC market due to the new 0.5% standard and the uncertainty over import licenses as described above. Import licenses can be allocated either on an annual basis or quarterly and in 2018, it was expected to be quarterly. As we stand, Chinese buyers still do not know if the “10%” of normal allocation on their import licenses described above is their quarterly allocation or whether there is more to be allocated in February or March. As we stand, all buyers are working on reduced quotas and reports from one major Chinese buyer suggests that they will only be buying at 65% of their normal capacity in February 2018. If no more license allocations are made in Quarter 1, this situation will get worse and the UK will be carrying very high and unsustainable stock levels.
• Over the past 2 -3 years, markets have emerged for the export of plastics – notably more material has been exported to Malaysia and to Eastern Europe, notably Poland. However, similar over supply conditions are now being experienced and there are very limited markets now available for the low-grade plastics which are typically collected from the household and by commercial and industrial sources – particularly low-grade mixed films, mixed rigids and general mixed polymers. UK collectors and processors are beginning to carry high stocks of these materials in the hope that alternative markets will emerge. Again, incineration and landfill may realistically be the only option and the cessation of many collections will continue.
• Controls are in place to ensure that material is handled in a compliant and environmentally beneficial manner when exported. Indeed, Transfrontier Shipment regulations impose a duty on the exporter to use processors that are of a broadly equivalent environmental standard to European processors. Most UK exports are to overseas processing mills where longstanding arrangements are in place and audits have been undertaken by suppliers.
• There is concern however that some exports to new Eastern European outlets are not as compliant as developed outlets and it is our understanding that the Polish authorities for example have started to clamp down on the range and quality of low grade plastics arriving there. The Recycling Association has shared these concerns with the Environment Agency.
• Most of the very new processing capacity that is coming on board in emerging Asian countries has been commissioned by compliant multi-national operators. For example, two very big new cardboard mills in Vietnam have been built by Nine Dragons and by Lee and Man, the two largest Chinese mill groups. These mills are state of the art and their environmental standards are better than UK mills.
• Shared intelligence, clampdowns and increased inspections by the UK and European  regulators has made it increasingly difficult for the UK to illegally export poor quality, grossly contaminated recyclables across the world and the majority of operators are compliant. Unfortunately, there are always illegal operators out there operating at and beyond the fringes, but government, industry and regulators have been successful in weeding these operators out.

January 2018