Navigating the many regulations governing the handling and movement of such cargo further complicates plastic scrap brokerage. This uncertainty limits small-to-medium sized plastic waste generators’ exposure to the global market’s most competitive outlets.
Variability of any given shipment means quality control and uniformity command a premium among end-users, yet this is not something conducive to the UK market, generally acknowledged to produce some of Europe’s poorest quality recylates. Those producers prioritising consistent high quality output experience great demand and obtain excellent prices. Yet the independent waste-collector-turned-recyclate-producer, for whom investment in reclamation technologies is not always a priority, continues to produce substandard recyclates. This leads to unsustainable partnerships between those producers, who expect unrealistic prices, the end-users, for whom yield and uniformity is a paramount, and the broker, who must consider both interests, and by virtue of position bears the lion’s share of risk.
The UK giants have invested heavily in necessary infrastructure to compete globally, but are reliant upon high stock turnover to cover fixed operating costs. The general opinion that expenses incurred to increase output quality increases proportionally to the increased product value means there is little incentive to upgrade and optimise sorting processes.
Few suppliers have the space required to stockpile materials and many businesses models are structured around waste collection. When the demand for material is low, the supplier can seldom decrease input accordingly, since contracts are already in place. When a bottleneck occurs, such as that witnessed in the aftermath of the Hanjin shipping crisis of September 2016, material must still be moved, albeit at a highly inflated cost absorbed by either the producer or end-user.
Creative logistics solutions
Herein lies an opportunity to those traders who can apply creative logistics solutions. While the archetypical trader is one operating from a bedroom juggling exchange rates, payment terms and shipping costs to make a miniscule margin, the more entrepreneurial are adding value and transforming materials. In an industry that relies upon effective logistic solutions, it is the traders who have forged strong ties with shipping lines and agents who are in a position of strength.
The Chinese Green Fence initiative, a recurrence of the 2013 policy, has bought a renewed focus on the quality of plastics exported. Such measures must be welcomed insofar as they force UK producers to question quality control. Shipments not meeting the requirements are often diverted towards the less stringent developing manufacturing bases of the ASEAN network. Thailand and Malaysia have benefitted from this renewed attention, particularly Malaysia which saw its currency plummet 15% in 2015-16, yet it now holds a pole position in the race to ‘dispose’ of UK scrap, enabling them to slash prices and become more selective.
Increased stringency means that some materials cannot be shipped unless FOC or remittance is given. In a matter of weeks, the tables have turned so that suppliers, once selective, can no longer even give away some grades. Although UK prices have generally fallen, PET and HDPE prices continue to rise gradually, on account of strong European demands, and is largely isolated from shipping and Far East price fluctuations.
Trust is a word seldom used in the industry where it is often tempting to make a fast buck at the expense of nurturing on-going relationship. Outwardly there is little symbiosis; suppliers seem willing to change for a fiver, milking the cash cow yet neglecting to make the necessary adjustment to ensure sustainable relationships or indeed their own long-term viability. Such adjustments range from simple presentation, sampling and analysis, to operational improvements such as baling and storage processes. Offering clear pictures and data analysis allows the end user to make a more informed judgment.
Clear warning signal
Some producers have the attitude “payment on loading, sold as seen” which suits more mobile, regional traders. Yet for those centralised traders who buy multiple loads nationally within a short timeframe, relying upon operational efficiency and optimisation to maintain profits, this approach functions as a clear warning sign. Such short-term thinking means some suppliers are particularly vulnerable in times of crisis, when plunging prices make export less rewarding and soaring container costs mean that only those traders who have invested in strong partnerships with shipping lines and agents can meet the demand.
The dividends of such trust are seen in the years ahead, when the supplier, who has been messed around by bedroom traders once too often, returns willing to accept less on account of the previous professional service and successful dealings. The same applies to the trader, wary of getting stung by a new supplier in pursuit of a bargain. When a producer is willing to offer guarantees, proof they understand and trust their material, successful trading invariably ensues. This short-term mentality prevalent among some UK suppliers underlines how little faith there is in the quality of UK materials.