In the waste and recycling industry, 1st April has always been a key date in the annual calendar; it’s been significant because it is the date that landfill tax increases each year. Between 2008 and 2014 this was a hefty £8 per tonne each year. Now that the annual increases have been pegged to RPI – which leads to an increase of just £1.70 (2.0%) per tonne this year – the tax rise is less of a key driver.
Nevertheless, the industry in general is still mostly hooked on April price increases. It is worth noting that where a few suppliers have started to deviate from this routine, it has inevitably been to bring the increases forward (so in their favour!) to March, or even January.
In addition to landfill tax rates levelling out, the proportion of commercial and industrial waste being disposed of to landfill has reduced significantly in recent years and more than half of England’s landfill sites have closed down since 2006 as a result.
Non-recyclable residual waste is instead being processed into a product called RDF (Refuse Derived Fuel), which is then incinerated with energy recovered for heat and power. While “energy from waste” capacity in the UK is steadily increasing, the majority of RDF is destined for export markets in continental Europe, notably Germany and Holland.
While these countries have a surplus of treatment capacity, which is encouraging the export of UK RDF, it should be noted that they still charge a gate fee for accepting the waste. Once haulage costs are accounted for (back loaded by continental carriers), the total cost is in the same ballpark as landfill disposal within the UK.
The catch here though is that while the waste is being physically exported from the UK, the flow of currency is in the same direction. The weakened pound will start to squeeze RDF exporters as their foreign exchange forward contracts expire over the coming months. Inevitably this will be passed on to customers and down the chain to the waste producers themselves in the form of higher prices.
Rising diesel prices over the last 12 months and higher payroll costs – including pensions, living wage and the apprenticeship levy – are all contributing to increased overheads for waste contractors. 1st April will be the date that many waste contractors choose to impose price increases, either in response to, or in anticipation of these drivers.
So far, we are seeing proposed increases of up to 10% for General Waste collections but with some significant variations between suppliers, depending on their exposure to RDF exports. Obviously, we are negotiating hard on behalf of customers to prevent suppliers from using this as an opportunity to improve their margins at the same time!
For more information, contact us.
Article by: Pete Bramhall