Gate fees and exchange rate ‘putting pressure’ on RDF exports
Movement in exchange rates and rising gate fees for the treatment of refuse derived fuel (RDF) may be putting UK-based exporters off the material under financial pressure, senior industry figures have warned.
A continued weakening of the Pound to the Euro in the long term could act as a catalyst to the development of more energy from waste capacity in the UK, as it becomes less economically viable to export the material overseas for treatment, it has been suggested.
Exchange rates have shifted rapidly in the wake of the UK’s referendum vote to leave the European Union on 23 June. At the time of writing £1 is equivalent can buy around €1.18, having been nearer €1.28 at the start of June.
Commenting on current market dynamics, Andy Hill market development director for solid recovered fuel at the global waste and resources firm Suez said that it was ‘inevitable’ that a fall in the Pound would put pressure on UK RDF producers. However, he pointed out that other factors are also at play.
He said: “The industry has seen a recent increase in RDF gate fees, which has largely been caused by three factors – an increase in RDF production in the UK; seasonal variation reducing the demand for RDF-generated power in the summer months; and economic growth in the importing countries, which has led to greater volumes and subsequent availability of domestic waste.
“The rise in gate fees, and the drop in the value of the Pound against the Euro, will inevitably put financial pressure on UK-based RDF producers, so it is vital that the regulatory agencies continue to monitor RDF activity to ensure that all UK exporters continue to produce and export RDF responsibly.”
Other companies have confirmed to letsrecycle.com that the cost of exporting material has risen in recent weeks.
Steve Burton, director of Andusia Recovered Fuels, said his company has warned suppliers that export cost increases could be expected in 2017.
He said: “The Brexit vote hasn’t had an impact on the RDF market as of yet. We have bought our Euros at a fixed rate, which will see us through until the end of this year.
“If the current exchange rate between the pound and euro remains the same then that could increase costs for waste management companies.”
An RDF expert in southern England, added: “Some of the extra costs have come because of the Exchange rate, more significant pressure is coming because of increased demand which could be down to a better economy in Germany and also that the population there has risen.
“Some longer term deals are coming to an end this summer and because quite a lot of deals are done on a fixed one-year price, these could see prices rising. Companies are quite likely to have to pass some of these extra costs back to customers, the suppliers of the waste which is baled into RDF.”
Exports of RDF from the UK to the continent have grown vastly in recent years, with shipments of material topping 2.7 million tonnes in 2015, up from just 272,000 tonnes around four years earlier. This growth has in part been fuelled by a relative lack of energy-from-waste plants in the UK to burn waste, compared to European countries such as Germany and the Netherlands, where plants have excess capacity to be filled.
In recent years, experts have warned that the tonnage of material sent overseas for recycling is likely to level off, with demand eventually likely to reach a peak And, one exporter has claimed that with current market conditions and the costs of setting up a facility to process residual waste into RDF, involving collecting, baling and wrapping of material, there are likely to be fewer new entrants to the field.
Stuart Rain, managing director of Probio Energy, warned that price rises could see a return to some material going to landfill.
He said: “RDF prices have shot up and up. They can’t continue to rise as this will lead to companies to start landfilling again, which is something we want to move away from as a sector. Price increases will have a huge impact across the supply chain.”