Jonathan Short, Deputy Chairman of ECO Plastics outlines why long-term partnerships are key to managing increasing amounts of resource, export difficulties and a cautious economic climate.
As with all commodity markets, the plastics industry has always been driven by fluctuating supply and demand. The recycling sector has evolved around these market forces and unsurprisingly spot trading across the supply chain has become the norm. Buying material on the spot market can sometimes deliver good prices and also ensures competitors are not generating higher returns. The inherent risk however, is that when markets shrink, or even collapse, the same companies face significant negative commercial exposure.
While a regular model, and one that has been in place since the beginnings of our industry, this way of doing business is driven by short term-ist, defensive thinking. Crucially, I believe that it will also prevent our industry from ever reaching its full potential.
The time has come to think more strategically about the domestic recycling sector and how it must evolve to manage increasing amounts of resource, export difficulties and a cautious economic climate. Moving away from short-term contracts to long term, committed partnerships is at the very heart of the process. The additional certainty that they offer is invaluable in providing companies with greater visibility over future revenues and profits, and, in turn, giving investors the confidence necessary to invest in the creation of new infrastructure.
Indeed, inward investment is essential if the UK is ever to establish a truly closed loop, 21st century recycling system which is capable of processing all those valuable materials which cannot currently be recycled domestically, without recourse to export, incineration or landfill.
Winning over customers is not just about price either. Added-value benefits such as product quality assurance and operational optimisation go hand in hand with long-term strategic partnerships. ECO Plastics’ joint venture with Coca Cola Enterprises, Continuum Recycling, is a prime example of how two companies working closely together can deliver a premium output which underpins both organisations’ strategic objectives.
It’s encouraging to see that this trend has started to spread across the supply chain. At the start of the year we were delighted to announce a partnership with recycling giant Viridor which will provide ECO Plastics with high quality used plastics, helping to close the domestic loop in soft drinks packaging.
Local authorities are also getting in on the act. Our recent deal with Gwynedd Council not only helped the local authority to divert material away from landfill but also offered access to our pioneering Supplier Quality Audit team, which allowed them to tap into ECO Plastics’ expertise to refine their own processes to produce the most efficient resource streams.
As a result of all of this, ECO Plastics has instigated a strategic shift to move our entire business to long-term agreements – 35 per cent of our feedstock and 40 per cent of our output is already committed to such partnerships, with a target to reach 70 per cent and 75 per cent respectively by the end of 2014.
By working closely with our technical partners we are able to focus on improving the extraction of difficult yet valuable materials, which will significantly add value to our feedstock, a benefit which we can pass on to our long-term supply partners. We also hope our company ethics regarding transparency will help us maintain strong relationships within the supply chain.
More generally, as China’s appetite for waste continues to diminish, the necessity of investing in our own recycling network becomes more real. If we do not the alternative is that we will be left with a mass of material that we can neither recycle nor export, which will end up in already overflowing landfills.
We see an industry-wide move to longer term agreements as the foundation to resolving this dilemma, unlocking the investment necessary to boost our infrastructure and improve the quality of our waste streams. Based on recent developments, we are hopefully one step closer to achieving the industry’s ultimate goal.
Jonathan Short is Deputy Chairman of plastics recycling company ECO Plastics.
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How will the government and DMOs address the challenges of including glass in DRS while ensuring a level playing field across the UK?
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