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Chapter 5 Key Challenges and Opportunities for Australia's Recycling Effort

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Chapter 5 Key Challenges and Opportunities for Australia's Recycling Effort Chapter 5 Key challenges and opportunities for Australia's recycling effort 5.1 Evidence received during this inquiry indicates that there are significant challenges facing the recycling industry, with a number of witnesses calling it a crisis. However, stakeholders recognised that some of these challenges might be a catalyst for change that would facilitate an improved recycling sector in Australia. 5.2 The challenges arise from a number of factors including the regulatory environment, changes in the international market for recyclable materials, a weak domestic market for recycled products, and a lack of investment in infrastructure. 5.3 A key issue that arose during this inquiry was the Chinese Government's decision to restrict imports of 24 types of solid waste, including various plastics and unsorted mixed papers, and the setting of more stringent standards for contamination levels. Up until this decision, the exportation of recycled waste to China has been a low-cost option upon which many developed countries have relied for managing recycling. The importation restrictions are necessitating all Australian governments and the recycling industry to reconsider existing approaches to how recycled waste is managed. 5.4 This chapter commences the report's discussion of the current state of Australia's recycling industry by examining the lack of end-markets for recyclable materials, market volatility, and the recent ban imposed by China on the importation of many types of recyclable waste. Opportunities to improve how recycled waste is managed are then discussed, with a key focus being evidence from stakeholders advocating the need to move from a 'linear economy' where raw materials are used to make a product that can be discarded, to a 'circular economy' based on recycling. Overview of current economic conditions 5.5 Overall, there is a trend in Australians generating less municipal waste per person with a greater proportion of the waste being recycled.1 Over the period 2006– 07 to 2014–15, recycling (excluding fly ash) grew by 32 per cent. This growth rate of 1.6 per cent per year outstripped the average annual population growth of 1.5 per cent.2 As noted by Lake Macquarie City Council, it appears that Australians are more likely to be enthusiastic recyclers than they are at seeking to avoid waste generation— 1 Australian National Waste Report 2016, p. vii. 2 Australian National Waste Report 2016, p. 11. 72 accordingly, the increasing amounts of material generated for recycling is placing the recycling industry under pressure.3 5.6 During this period of growth in recycling, practices in Australia's recycling sector have been influenced by a lack of domestic markets for recycled products, market volatility and the export of recycled waste. 5.7 Several submitters highlighted the lack of local demand for recyclable materials. They explained that this has contributed to poor economic conditions in the recycling industry and resulted in unsustainable practices, such as stockpiling and export to overseas markets. For example, the Hunter Joint Organisation of Councils, which represents ten councils in the Hunter/Central Coast Waste Region of New South Wales, submitted that in its region, there is 'limited reprocessing infrastructure…for dry recyclables, with two MRF [material recovery facilities] facilities taking materials from almost 1 million residents'. As the local and regional markets for recycled materials are 'relatively immature', it advised that 'a large proportion of dry recyclables are sent overseas for recycling'.4 5.8 Similarly, Maitland City Council submitted that the 'markets for most recyclables in Australia are unable to absorb the quantity of material collected'. As a result, unstainable practices such as stockpiling and export to overseas markets are occurring.5 The NWRIC also submitted that it considers that the markets for glass, soft plastic and end of life tyres 'are under stress…or have failed'.6 5.9 The reliance on export to overseas markets, and in particular China, was raised in evidence. It was noted that China has in the past provided a stable market for Australian recyclable materials. Mr Tony Monaco, National Finance and Administration Manager, Visy Recycling, explained: The growth of China as a market over the last 20 years has provided a large and steady outlet for the sale and re-use of recyclable commodities. Australian kerbside recyclers have, to a greater or lesser extent, relied on this outlet.7 5.10 Mr Tony Khoury, Executive Director, Waste Contractors and Recyclers Association of NSW (WCRA), also commented on the reliance on the Chinese market and lack of local markets. Mr Khoury stated that 'for a number of years, our members have expressed concern about both the reliance on exporting material to China that 3 Lake Macquarie City Council, Submission 37, p. 5. 4 Hunter Joint Organisation of Councils, Submission 22, p. 8. 5 Maitland City Council, Submission 40, p. 2. 6 National Waste and Recycling Industry Council, Submission 10, p. 3. The NWRIC explained that by market failure, it means materials are being landfilled or stockpiled. 7 Mr Tony Monaco, Visy Recycling, Committee Hansard, 20 November 2017, p. 26. 73 has high contamination levels and the fact that there have been no local markets for glass.8 5.11 This lack of local demand is largely influenced by cost considerations. For example, the South Australian Government highlighted the impact of commodity prices for imported materials (both virgin and recovered) relative to the prices for local recovered material on the domestic market for recycled product. It submitted that where imported products can be purchased more cheaply than products produced using locally recovered material, there is likely to be a detrimental impact on local businesses.9 5.12 Similarly, the financial viability of recycling depends on whether material recovery facilities (MRFs) can obtain a better price than the cost of landfill. Local Government NSW explained: Kerbside recycling is processed at 48 material recovery facilities (MRFs) across NSW. At these facilities, co-mingled recycling is sorted into various products either to be processed on site or sent off site for processing or re- use. Some of the sorted recycled material can be sold, and in some cases the MRF will pay for another facility to process it. However, as long as the MRFs receive a better price than the cost of landfill it is still worthwhile for the MRF.10 5.13 Ms Gayle Sloan, Chief Executive Officer, Waste Management Association of Australia (WMAA), also argued that the lack of genuine progress of the national waste strategy in the last eight years has hampered the creation of secondary markets and a circular economy in Australia. If this had occurred, Australia 'would not have the continued reliance we have, to an extent, on global trading markets, such as China, for our commodities'.11 5.14 It was emphasised that domestic markets for recycled products are required for recycling efforts to be sustainable.12 Local Government NSW emphasised that 'real and productive domestic recycled product markets are desperately needed'.13 The Local Government Association of Tasmania similarly explained that 'long term viable markets for collected recycling is crucial to the success of recycling programs', and that the development of new markets would be required as recycling programs are 8 Mr Tony Khoury, WCRA, Committee Hansard, 14 March 2018, p. 23. 9 South Australian Government, Submission 36, p. 21. 10 Local Government NSW, Submission 13, p. 3. 11 Ms Gayle Sloan, Waste Management Association of Australia, Committee Hansard, 14 March 2018, p. 12. See also Councillor Linda Scott, Local Government NSW, Committee Hansard, 14 March 2018. p. 40; Mr Mark Venhoek, SUEZ Australia and New Zealand, Committee Hansard, 14 March 2018p. 49. 12 Mr Tony Kane, Visy Recycling, Committee Hansard, 20 November 2017, p. 30. 13 Local Government NSW, Submission 13, p. 4. 74 expanded.14 The WMAA and Re.Group advised that the current lack of sustainable markets might result in some recycling companies failing.15 5.15 Market volatility is also an issue. The Australian Capital Territory Government noted that recyclables are sold into global commodity markets and as such, recovered steel and aluminium are affected by the price of virgin material and recovered plastics are affected by the price of crude oil.16 Market developments can have significant implications for the financial viability and management of waste and recycling programs. The Hunter Joint Organisation of Councils explained: The eventual end markets and corresponding commodity prices for materials dictate whether it is practical and viable to collect the materials for recycling or to landfill them. A recent example relates to the drop in commodity prices for ferrous scrap metals. Although these prices are now on the rise again, councils in the region had to make strategic decisions as to whether to continue to collect metals for recycling or to landfill them.17 5.16 The Adelaide Hills Region Waste Management Authority also noted that councils have struggled to recycle scrap metal in a cost effective manner since scrap metal pricing has fallen.18 5.17 Mr Tony Monaco, Visy Recycling, also commented on market volatility and noted that there has been an 'overall decline in the commercial viability of recycling and recyclable feedstock markets globally'. However, with China banning the importation of certain recyclable plastic grades and mixed paper from January 2018, the market is now changing rapidly. Mr Monaco concluded, 'export-facing commodity sales are exposed to unavoidable volatility and financial risk'.19 Changes to China's import policies 5.18 Existing challenges with lack of domestic markets have been exacerbated by recent developments affecting the export of recycled waste. 14 Local Government Association of Tasmania, Submission 19, p. 5. 15 Waste Management Association of Australia, Submission 52, pp.
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