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Technical solutions that command a premium

Transforming residual waste into a solid recovered fuel (SRF) for use in cement manufacture has been happening for some time now.

But what makes Neales Waste Management’s new residual waste MRF different is that it will be producing SRF solely for use within the operation of its parent group.

The MRF has been specifically built as a fuel production facility for the Aalborg Portland cement plant in Denmark. Both Neales and the Aalborg plant are part of the same Italian multinational group, Cementir Holdings.

A major player in the production and distribution of white and grey cement, aggregate and concrete products, Cementir claims to be the largest producer and exporter of white cement in the world. It has production sites in Denmark, Egypt, China, Malaysia and the US. It acquired Neales in 2012 for e11.7m (£8.7m) and the business now sits within a company called Recydia – the waste arm of Cementir – based in Turkey.

As Neales Waste Management’s UK director Hugh Stewart explains, the purpose of the acquisition was to increase the level of diversification within the group, away from the cement business, as well as to increase its ability to manufacture SRF for use within its cement business, in particular its kiln in Aalborg. This eliminates the need for the group to source fuel for the plant and gives it security of supply.

A Cementir report published in 2014 states the company’s position that “waste is strategically important to reduce fossil fuel impact on cement and to lower overall energy costs”.

With the MRF now in its final stages of commissioning, Neales intends to source more commercial and industrial waste for the plant, which Stewart explains is generally better than municipal waste for achieving an SRF quality.

“The big downside to municipal waste is that it is wet – there is too much food still in it. And so long as food remains in the waste stream, the chances of recovering value from the residual element remain fairly low.

“The big problem we have here in England – and I am not just saying this because I am Scottish and have spent the past couple of years there – but the zero waste regulations in Scotland forced people to segregate their food waste. Any big producer of food waste was forced to segregate it, and it made a huge difference to the residual waste stream. It became much drier and much easier to recycle and recover value from. That hasn’t happened here.”

Stewart is a big believer in segregating food waste – he says that removing it would increase easily the amount his MRF could extract for recycling from 10% to 20-30%.

“The only thing that affects the ‘recyclability’, for want of a better word, is food waste contamination. And there is no imperative on waste producers [in England] to segregate that material like there is in Scotland. And, certainly, economically it doesn’t make a huge amount of sense for waste producers to segregate it,” he says.

“I don’t think the market will provide that solution. It is going to require some sort of regulation to say ‘you have got to separate that food waste’. And I don’t understand why you can’t do it in England because Scotland is only a microcosm of England, when all is said and done.

“You have got your main cities and you have got your far-flung areas, and it only really applies in the main cities. But there is no political appetite to put the cost on to business and, essentially, that is what [the issue] is.”

He believes the waste industry itself is under-priced in terms of collection and processing: “For companies, whether we are talking Sita, Biffa or Neales, to make the levels of return that you really need to make for the investment we are putting in, we are probably under-priced by a good 20%.”

As an example of this downward pricing pressure on the sector, Stewart cites local firm White Recycling, which recently went under. In the aftermath, Neales found itself on the receiving end of enquiries from former White’s customers and waste brokers, but the rates they were quoting were simply not viable.

“That’s why it went bust – because you can’t make money. It is impossible to make money on £9 per lift,” Stewart says.

Neales’ strategy is to stick to realistic pricing coupled with the message that customers are paying more for a better service. Stewart admits that the willingness to pay a higher price for a waste service depends on who the customer is.

He cites an example from when he worked at William Tracey group, and one of its customers was a hugely successful leather manufacturer. Key to its operation was the removal of filter cake from the end of its process – if it was not removed, operations would grind to a halt.

“So what William Tracey group did was go in and find a home for all those really difficult materials, and we provided a fantastic service. But the leather manufacturer paid top dollar for that because, in the grand scheme of things, that cost was almost irrelevant to them because it kept the process going.”

He concedes this is an extreme case; at the other end there is someone who simply wants his wheelie bin collected once a week, is not fussed about the day or the level of service, and does not want to pay more than he needs to.

“What we are trying to do with our business is move it from the bottom left-hand corner to the top right-hand corner, and try to make more of the customers for whom service is critical and for whom the solution element of the service is critical. Which is an easy thing to say, but more difficult to do.”

As with all businesses, Neales is adapting. Stewart says: “The difference now is that a lot of customers, and certainly our major ones, want to see a non-landfill option and to see the value of the residual waste maximised. This is one of the reasons why we do not just offer the refuse-derived fuel (RDF) route.

“A traditional RDF route will become, essentially, the new landfill, where all people are going to do is pack up the waste and burn it. But what are they really achieving by that?  Producing a high-quality SRF fuel is genuine recovery – that is real recovery from the waste stream.”

He says people seem to be more concerned about the end point of waste rather than where it is and whether it is exported: “They certainly like the fact that we have that closed loop – and when I say closed loop, we can actually control it within the group. I don’t think there are many other competitors which can say they consume the material within their own group. That is certainly a big plus point for customers.”

Tonnage information has also been a huge change across the sector in recent years, with customers wanting and expecting weight information. Stewart sees this as a positive for the industry because, armed with accurate weight data, waste companies are in a better position to negotiate fairer prices and say that more needs to be paid if bins are heavy.

Neales tends to give a price per lift with a maximum weight for the bin; if this is exceeded, it will go back and renegotiate the price. “But we have found that when we do go back to them, if we go back with three months’ worth of data and say ‘your average lift is this heavy’, customers are prepared to pay a premium. Or they will try to recycle more to reduce the weight they are paying for.”

For Stewart, who joined the business last June, the ambition is for Neales to become a hugely competent and profitable regional player.

He says: “We want [customers] for whom great levels of service and great technical solutions are a priority, to help them achieve their own environmental goals. And we would like to think those are areas where there would be a price premium that would support our investment strategy and support the returns that we need to get from the business.”   

Technical solutions that command a premium

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