© Valpak All Rights Reserved Recycling markets & their impact on the waste management sector Andrew Burridge – Materials Sales Manager.

© Valpak All Rights Reserved

Recycling markets & their impact on the waste management sector Andrew Burridge – Materials Sales Manager


Recovered fibre market overview

Increasing production in CEPI countries providing demand:

- Newsprint up 5% in 2010 compared to 2009.

- Packaging grades up 9% in 2010 compared to 2009.

New board capacity in Germany and Eastern Europe during 2010 &

new board capacity in the UK at the end of 2011 to the start of 2012.

Strong demand from China for cardboard & mixed grades.

Prices for key end products such as newsprint and testliner moving

up since beginning of the year.

2


Recovered fibre prices

3

Source: letsrecycle.com

£/tonne


Recovered plastics market overview

Key demand drivers

- Packer filler interest in food grade R-PET and R-HDPE.

- Large increase in capacity for PET recycling in Europe.

- General growth in Chinese domestic market.

Key price drivers 2010 / 2011:

- Crude oil.

- Virgin plastics.

- Cotton.

4


Recovered plastics overview

Increasingly strong & competitive European markets.

An increased interest in mixed plastics recycling in various European

countries. Also agricultural plastics.

5


Recovered plastics prices

6

£/tonne


Virgin polymer prices

7Source: European Plastics News

€/to

nne


Crude oil prices

8Source: indexmundi.com


Steel market overview

Demand factors:

- Manufacturing in Northern European countries (e.g. German

automotive industry).

- Construction sector still fairly weak.

- Not a uniform recovery in west.

World crude steel production up 15% in 2010 from 2009. 7% fall

2008 to 2009. (source: World steel association)

Strongest growth 2009 to 2010 is US (38.5%) followed by Germany

(34.1%) and Japan (25.2%). (source: World steel association)

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Steel market overview

Steel consumption predicted to increase 4% in 2011 and 2012.

(Eurofer)

Pricing factors:

- Immediate supply / demand dynamics playing an important

role.

- Supply issues with coking coal at beginning of the year

affected markets.

10


Ferrous scrap prices (Europe)

11

€/to

nne


Aluminium market overview

General trend of increasing prices since beginning of 2009.

Strong increase in price increases entering 2011.

Market currently driven by a strong growth in demand from

developing economies (BRIC). Chinese automotive sector

particularly important.

Start of recovery in northern Europe also adding to demand.

Market sensitive to supply restraints.

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Markets (general) –medium & longer term factors

European market

–Speed of recovery in sectors such as manufacturing &

construction.

–Consumer confidence and consumption.

–Technology and innovation in supply chain.

–New and existing legislation (WFD, WEEE, Batteries, country

specific bans / targets).

Asian markets:

–Domestic growth rates.

–Waste infrastructure & legislation.

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Why is understanding secondary material markets important?

Understanding demand:

–Security of demand: volumes now being collected are

significant and increasing year on year often driven by

legislation.

–Consistency of demand, e.g. reliance on one sector.

Financial:

–Their value is increasingly significant.

–Materials income factored into business decisions.

–Long term pricing contracts.

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Understanding the supply chain

Understanding the supply chain and its environment helps us:

–identify factors that when combined with a downturn in prices

may cause a crash.

–assess risk.

–make informed decisions during a crisis.

–understand when the market might start to recover.

The dynamics of a supply chain and the factors affecting it are likely

to vary by material type, grade and geographic location.

15


Secondary raw materials as commodities

Prices are affected by supply and demand dynamics and external

factors.

The globalisation of the recycling industry has added an additional

layer of complexity:

–shipping times.

–understanding the market dynamics & drivers in a variety of

countries.

Even where material is recycled locally demand & price will be

influenced by global factors.

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Looking for indicators of future price movements (cardboard)

Leading Medium to short term Short term (export)

1. Pulp prices 1. Containerboard prices 1. Taxes

2. Economic trends (GDP, maufacturing

indicies, etc.), i.e. indicators of downstream

demand.

2. Price differentials between grades.

Ex-works prices:

1. Shipping rates

2. Exchange rates

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Comments on indicators

Some factors have a more direct impact than others.

Some factors ‘influence’ and others may have a more direct

relationship.

Short term supply & demand play an important role.

Less tangible factors such as market sentiment have an impact

(particularly post 2008).

‘Leading’ indicators have a more immediate impact where shipping

times are long.

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Material quality

In a low demand market higher quality material will find a home first

Prices for lower quality grades tend to fall further and recover more

slowly:

–Lower quality plastic grades: 25-35% of 2008 peak in Jan

2009.

–Higher quality plastic grades: 40-50% of 2008 peak in Jan

2009.

Material consistency counts.

Higher quality material can be used by all markets.

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Summary

Many markets currently seeing relatively high prices in Q1 & 2 2011.

Prices often strongly linked to key commodities as well as demand

dynamics in the immediate supply chain.

Everyone in the supply chain is affected by the markets both

positively and negatively.

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© Valpak All Rights Reserved Recycling markets & their impact on the waste management sector Andrew Burridge – Materials Sales Manager.

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