A perfect storm has blown across the waste wood market in recent months. Factors including weather, fire, economics and government policy have combined to cause a glut of material in parts of the country.
In England, a waste wood mountain of low-grade material spread fear in the sector during the summer.
As winter approaches, recyclers hope that cold weather will increase demand from biomass export markets.
Last month, the Wood Recyclers Association (WRA) said the time was not right to consider wood landfill restrictions, despite backing such a policy “100%” as recently as February. The WRA now argues that the Government should focus on helping the development of the domestic energy-from-waste (EfW) sector as an end market.
Guy Evans, a waste wood market specialist at GE Environmental Consultants, said the industry’s response to Defra’s landfill consultation was as expected, given the current state of the market. The mild winter last year and lower electricity prices, he said, meant there had been less demand from northern Europe for low-grade wood exports.
The slow collapse during the past year of the UK’s largest consumer of waste wood - the Sonae panel board factory on Merseyside - following a major fire in 2011, took 15% or 1,200 tonnes a day of demand out of the market.
This combination of factors alone caused a glut of wood to stack up in yards, said Evans, causing concern that a landfill restriction would further “swamp” recyclers.
Peter Butt, executive director of the WRA, agreed with that analysis. The “wood mountain” of mainly low-quality material was still there, he said. The situation, like the market, was regional, with material sitting in yards in the south of England which normally feed export markets.
Butt added that the European panelboard industry was “in a bit of a state” and had been diverting material to biomass, adding to reduced demand for UK exports.
The current problems come on top of existing tensions in the market. A recent review of research published by Defra as part of its landfill consultation identified a number of common concerns.
Growing demand for biomass, supported by Government incentives, is seen by the panelboard industry - the biggest single market, accounting for up to 50% of UK waste wood - as a threat to its ability to compete for material. The Wood Panel Industries Federation (WPIF) has been lobbying hard for the Government to reform the Renewables Obligation to remove the “distortion” in the market and to ban wood to landfill.
WPIF director general Alastair Kerr has warned that the Government’s focus on large-scale wood biomass could increase prices and threaten the existence of the UK industry.
Defra says that future demand for wood from the panelboard sector is dependent on the economic situation and recovery in the furniture and construction sectors. It estimates that demand will stay below its 2007 high for some time.
The industry has generally welcomed the growth of biomass as an alternative market for low-grade waste wood after many years of dependency on board mills as the only customer. Butt said the swing from panelboard to biomass would continue but the former would remain a “very important market” alongside the high-quality markets for animal bedding, mulches and coverings.
If the planned growth of domestic biomass and EfW capacity goes to plan, the industry predicts increasing demand and a possible shortage of material as early as 2015.
Evans said it was just a matter of time before the domestic EfW market developed. He said recent problems with delays to certain projects and financing issues meant that domestic demand was not yet rising, but that could begin to change next year when a new RWE biomass plant should go online.
But he warned that there could develop a more pronounced north-south divide “because all the [domestic] end markets seem to be in the north and all the exports in the south”.
Evans said reliance on exports, currently between 200,000 and 540,000 tonnes a year, would continue while the domestic infrastructure develops, and countries such as Sweden have incineration overcapacity and contractual supply obligations.
In its evidence to Defra, the WRA said it could not say how long the current situation would last.
“Much depends on the emerging biomass market, which is still in its infancy and has its share of teething troubles but which, potentially, could take up the slack and perhaps return us to being a supply-driven industry within the next four or five years.”
Meanwhile, Defra suggests that demand for animal bedding, which now accounts for 20% of recovered wood demand, will stay high. It identifies concerns that demand for grade A and B wood - used in animal bedding, horticulture and industrial manufacturing - will begin to outstrip supply, forcing prices up and increasing costs for reprocessors.
Beyond the desire for a cold winter, the industry’s hope for increased demand in the more immediate term are focused on a recovering economy helping to increase production at the board mills, and for biomass plants at various stages of development to get up and running.
Butt said the current oversupply is a “short to medium term” problem.
He said it was clear that ministers’ “hearts are not in landfill bans”. Instead, in the short term, the Government should continue landfill tax escalation and “force as much as it can” the increase in EfW capacity as an end use for the types of difficult to recycle wood waste currently going to landfill.
While Evans agreed that the current problems were short-term, he said it was right to start working towards a landfill ban now. He argues that, by the time any ban actually came into effect, the balance of the market would have shifted, with increased demand from end users. A ban “is not going to happen overnight”, he added, “and if we have a cold winter and exports increase, there will be people crying out for wood again”.
Finally, he warned that the wood recycling industry must also address its quality problems which also affect demand: “If you are supplying a higher quality end product, you are more likely to be able to keep supplying your end markets.”