It would be nice to be able to write a piece without reference to Brexit and the UK’s decision to leave the European Union. Unfortunately, since the referendum in June the significant swing in currency has had a direct impact on the bottom line of those exporting fuels from the UK. The fact that the majority of gate fees are paid in Euros, together with a high proportion of the logistics costs, has undoubtedly put a number of contracts under severe pressure.
Capacity in Northern Europe has also been under pressure, particularly in the mass burn market. Speaking to off-takers (facilities that use RDF) they have experienced a noticeable increase in local waste volumes, particularly in the commercial sector.
Furthermore, relatively low barriers to entry in the mass burn market have meant that we have also seen a number of new entrants come in to the export market, particularly where there is little or no requirement for material to have undergone a great deal of pre-treatment and specification requirements are minimal.
Despite these challenges the export market for waste derived fuels continues to evolve and its dynamic nature means that there are always opportunities for producers and off-takers alike. The first area of opportunity is to look at the fuel you are producing and ensure that it’s meeting the needs of the market and optimising its potential return.
This opportunity is particularly exciting for producers who have a materials processing capability and are able to offer a degree of flexibility in the fuel they produce. Quite simply the greater the flexibility in fuels production the more offtake opportunities we are able to present to our clients. We have worked with a number of UK waste managers on developing a fuel to a certain specification, which is required by a specific process or facilities such as fluidised bed installations or Cement kilns.
This takes them out of the low value playing field and in to a more sustainable and higher value market. In effect it is the difference between straightforward disposal and becoming a fuel producer. This is one area where our experience of the hazardous waste market is also highly beneficial. Many of our international clients to whom we supply Hazardous waste also have a requirement for specific grades of RDF/SRF particularly in the cement market. Here blending fuels to a specific requirement is common practice therefore many off-takers we work with take both hazardous and no hazardous fuels.
A common term for this type of fuel, which sit somewhere between a low grade RDF and SRF, is hybrid. This material will meet a set of parameters in terms of CV, chlorine, particle size etc. but will not have had the same amount of processing (and related cost) as a fully developed SRF. This allows off-takers such as cement kilns to attract a slightly higher gate fee and they can then process the material further to meet their own specification.
The second big area of opportunity is logistics. There tends to be a great deal of focus on gate fees and understandably so. This has been the key component of disposal cost in the domestic market for as long as anyone can remember. The reality is however that when considering the export market logistics can account for up to 60% of the overall cost. To demonstrate the importance of logistical experience, aside from our own managed routes we exported approximately 200,000 tonnes of additional fuel on customers own TFSs over the last 12 months.
The export of waste derived fuels only works on the basis that the UK is a significant net importer. The result is that there is a lot of spare capacity on containers and lorries on their east bound route as they return to collect more products and materials. This presents two opportunities.
Firstly, to look at these shipping routes and to identify those that present a cost effective way to get fuels from the UK to facilities in Europe and Scandinavia.
Far more exciting however is to move further up the chain. The logistical experience of our management team for example has led to us providing a logistics management service to companies exporting to the UK. This has included paper and packaging, white goods and bulk materials. We then have access to the reverse leg to move fuels out of the UK. We have in effect created a full circle logistical model that benefits both importers and exporters. This model has enables customers to save up to 15% on their export costs on the logistics element alone.
Finally, we are also starting to see potential from new emerging markets including Asia. The huge volume of goods we receive from this continent means that there is significant capacity on the return leg making it is as cost effective in many cases as European logistics. There is also a huge demand for energy and as a result an appetite for cost effective and sustainable fuels. There is undoubtedly work that needs to be done in terms of lobbying and education to communicate the benefits of waste derived fuels in these countries but we expect to see significant growth in this market in the coming years.
Looking forward export presents a significant opportunity for UK waste mangers and the international facilities they serve. Those businesses who are prepared to review their logistical setup and who view what they are doing as fuel production and not just disposal will continue to realise the commercial benefits of the international market.
Louis Calders is commercial director at Totus Environmental