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Bleak future for smaller recyclers

A leading plastic recycler has warned that smaller recycling companies may not survive the Covid-19 pandemic as they struggle with a lack of liquidity caused by high stocks and large investments.

Henk Alssema , who chairs BIR’s plastics committee, says the coronavirus is ‘shaking the entire world and with devastating consequences’. Writing in the latest Mirror report for the plastics sector, Alssema adds that recycling companies are going through difficult times with weak demand for recycled plastics as a result of the lockdowns in many countries.

‘In all sectors not considered essential, processors and buyers of plastic products have suspended or massively reduced production. The resulting slump in demand has led to swelling inventories for a large number of recyclers’.

Alssema says they are also cutting back on output, putting employees on short-time working and even planning closure. ‘An additional problem for many companies is the lack of liquidity owing to high stocks and the large investments made over the years.

Market observers expect that some of the smaller recycling companies in particular will not survive this period of drought,’ he warns. On a brighter note, he believes the pandemic should be followed by many opportunities for the recycling industry.

Asian angle

Also in the Mirror, committee member Steve Wong reports on the Asian markets, saying that extended city lockdowns in the main recycling countries, such as Malaysia, Vietnam and India, and social distancing restrictions have resulted in only 30% of recyclers continuing to operate and, in general, at only 50% of their processing capacities.

‘As a result, a number of recyclers have been placed in financial distress as they are unable to meet the commitments of paying wages, rent and suppliers, or of clearing goods that have arrived at the ports.

‘To make matters worse, the scaling-down of shipping companies’ operations has led to insufficient container forwarding capacities, longer transit times owing to blank sailings and dramatic increases in freight rates. With transportation costs climbing and the flow of goods slowing, the global plastic scrap trade is now facing a very difficult time.’

Wong also considers the growing trend for more recycled content in new products and the opportunity that affords recyclers who can meet the quality specifications of brand owners.

‘However, the current range of qualifying scraps demanded by brand owners is not wide enough and many recyclers are finding it difficult to satisfy their needs.’

He says this means a long-term technical issue for the industry that will have to be resolved by research and the development of more recyclables to meet the desired standards.

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