The world reopens for business – slowly

The latest BIR update on the impact of the Covid-19 pandemic on the global recycling industry suggests many markets are moving into a tentative reopening phase.

Since China began to reopen its economy in mid-April, several cities including Guangzhou, part of Beijing, Liaoning and Heilongjiang have reported a second wave of the virus. But zero cases have been recorded recently in Hong Kong, Taiwan and Vietnam, with fewer infections registered in Malaysia, Thailand and the Philippines. BIR expects these countries to relax their restrictions in the coming weeks.

The pandemic has taken a heavy toll on China’s economy: output shrank by 6.8% in the first quarter of 2020, the lowest reading in decades, with industrial production, infrastructure investment and retail at an all-time low.

‘Demand for recycled plastics is at only 30-40% of pre-pandemic levels amid a slowdown in volumes requested by the manufacturing industry and cancellation of overseas orders. Recycled pellets are not selling well as a result of the oil price crash which reduced prime prices to record lows or their lowest levels for years. Poor sentiment and uncertainty over the economic outlook are dominating this market.’

BIR notes that recyclers face low selling prices for their materials while suppliers are unable to reduce their own prices owing to the high cost of shipping and the impact on availability of the lockdowns in exporting countries.

USA and Canada

In late April, there was a major shift in US states with the focus moving from a public safety-led perspective to an economic recovery perspective. Thirty-five US states have active stay-at-home orders with closures of non-essential businesses, while 14 specifically identify recycling as an essential/critical industry.

Initially, rules for businesses reopening involved a simple extension of personal protective equipment (PPE) requirements but now cover operating hours/business practices and entail revocation of operating licences if violated. Compensation for workers is becoming an issue as governors begin to utilize executive orders to deem any COVID-19 exposure to essential business workers as presumed employment hazard.

In its guidance to provinces, Canada’s federal government has included recycling among operations essential to the manufacturing supply chain. Most recyclers have decided to remain open but with reduced operations because their industrial suppliers are closed.

Volumes are down across the country and most facilities have cut staff accordingly. A wage subsidy programme is available to all businesses which are continuing to pay employees over the period from 15 March 15 to 7 June.

European picture

In Italy, rules are being relaxed based on four levels of risk. The strategy involves step-by-step opening with a time slot of 14 days, allowing infection checks to be made and analysed before moving on to the next step. Italy’s metals sector was scheduled to reopen on 4 May although recycling units have remained open throughout the crisis owing to their crucial role in waste management.

The recycling industry has sustained high costs through guaranteeing to stay open during the lockdown despite very low levels of business. Italy’s three national associations covering the entire range of recycling commodities have called on the government for greater support because the crisis has demonstrated the essential nature of recycling and of waste management as a whole.

Spain is also adopting a similar step-by-step reopening strategy. All essential recycling services have been allowed to remain in operation during the state of emergency but business has been slow. Financial aid in the form of subsidies and tax moratoriums have been offered to help alleviate the crisis.

Three-quarters of recycling centres in France have remained open to receive materials but turnover losses within the recycling sector in April and May are expected to be around 50%. The textiles recycling sector has witnessed a drop in collections and is facing a major threat owing to constraints on exports.

There remains a mixed picture on trading in the UK. About half of all metal recyclers closed fairly swiftly after the lockdown was implemented; some have since reopened a small proportion of their sites but are finding trading to be only around 40% of pre-Covid-19 levels.

Some police officers have wrongly challenged metal merchants, sometimes instructing them to close or for drivers to return to their yard premises. As a result, the British Metals Recycling Association (BMRA) wrote to the Chief Constable of each of the 43 police forces in the UK, urging them to advise their officers of the classification of metal recyclers as key workers.

Poland’s loosening of Covid-19 restrictions will also be executed in four phases. For April and May, the drop-off in secondary volumes in Poland is expected to be more than 30% for ferrous scrap, 50% for non-ferrous metals and over 20% for recovered paper. Virus-related production stoppages at factories have led to a loss of volume; post-production scrap from the troubled automotive sector has suffered a decrease of 70% over the last four weeks.

Logistics problems are reported in the Netherlands through a shortage of drivers as well as a drastic decrease in buyers of plastic recyclers’ end product.

Middle East

Countries in the Middle East remain in lockdown, although some are now starting to ease restrictions and reopen their economies. These include the UAE, Saudi Arabia and Jordan. Recyclers are back in operation but the flow of scrap is less than 20% of the norm.

All ports are operating normally and exports are continuing to move to countries that can accept material. The main issue for recyclers in the Middle East is the situation in the key market of India where shipping lines and container freight stations have been refusing to adhere to the Indian government’s order to provide free demurrage and detention (see below).

Ports problem eases

In India, logistics systems have been severely disrupted and associated production/consumption centres have been affected. Traders, importers, exporters, port operators, shipping lines and transporters are all facing huge challenges to continue their businesses given lower trading volumes and cash-flow issues.

A Government ruling that detention and demurrage charges for both break bulk and containerised shipping be made zero (with a grace period of 30 days if needed) was not immediately acted upon.

BIR member associations complained that shipping companies such as MSC, CMA CGM, APL, Maersk and Hapag were not waiving detention costs. However, on 1 May, the government’s Director General of Shipping re-stated the official rulings and this should provide substantial relief for Indian importers and for exporters around the world selling into India.