Workshop feedback – The Economics of Recycling: Is Recycling Worth It?
This past Wednesday 29 March 2017, PETCO hosted their first Member Workshop for the year, entitled “The Economics of Recycling: Is Recycling worth It?”
PETCO seeks to minimise the environmental impact of post-consumer PET on the South African landscape. In order to attain this vision and to build a sustainable recycling economy, we first need to understand how the economics of recycling work. Here is a simplified explanation:
In the recycling value chain, we know that there are men and women that collect the PET bottles for recycling – we call them ‘collectors’. But what happens to the bottles once we have collected them? The answer is that the bottles go to Recyclers (or, more accurately, re-processors). These are companies that make new products and they are competing, on a global level, with companies who make the same products from virgin material i.e. not from recycled material.
We need to understand that recycled material is a commodity and so there are rises and falls in the commodity prices depending on supply and demand, much like gold or platinum – except that the main driver of prices is the price of oil. So what happens when the price of oil falls? This means that there is less demand for recycled material, because the virgin PET price becomes lower than that of the recycled PET price. This means that recyclers have to stop buying bottles, because there is less demand for the recycled material that they make from those bottles. In turn, the bottles don’t get collected, because there is no-one to buy them.
That’s what PETCO’s main role is. It’s to step in and help the recycler by directly contributing to the price they pay for PET Bottles; when the price falls, PETCO assists to make up the difference so that recyclers can keep buying bottlers from collectors.
The other way we support the value chain is through 5 year contracts with our recycling partners to collect and process a certain predetermined number of tonnes of PET bottles annually. This creates a value (or a home) for the bottles. From the collectors’ perspective, PETCO aims to prevent the situation where the bottle price becomes so low that collectors stop collecting it.
This topic was further interrogated during the Workshop, with Dr. Joël R.A. Houdet, our keynote speaker from Integrated Sustainability Services, setting the scene through exploring at the following questions:
What impact do economic market conditions (global or local) have on how we manage our waste and recyclables? How have the historic markets for recycled commodities changed? What role should government play to support the industry? How does recycling fit into the big picture of sustainability / climate change / global warming? Should we still be encouraging recycling and if so why?
This was then followed by Alistair Schorn, Business Development Manager for PETCO, presenting the PETCO model and deep-diving into how PETCO helps the recycler by directly contributing to the price they pay for PET Bottles.
Chandru Wadhwani, joint Managing Director for Extrupet (Pty) Ltd. – the largest recycler in Africa, closed the formal proceedings off with an overview of the opportunities and challenges facing recyclers in the current economic and environmental landscape in South Africa.
Download the full programme and all presentations here.