It has been interesting to see how the focus on Tolvik’s recently released report “RDF Exports: Here for Good?” was upon our projection that UK RDF exports were unlikely to exceed 2.5 million tonnes (Mt) per annum. Unfortunately a number missed the clarification that this would be “on a sustained basis”. So does this matter? Yes.
The latest available data for 2014 suggests that RDF exports from the UK totalled just above 2.6Mt (England & Wales 2.4Mt, Scotland 0.1Mt and N. Ireland 0.1Mt). Without this additional clarification it would be reasonable to infer that our view was that RDF exports reached their peak in 2014 and will start to decline from 2015 onwards. This is not the case.
Whilst RDF exports from the UK have recently levelled out at around 200kt per month, it is pretty likely that, sometime in the near future, exports will ‘kick on’ again to a higher monthly total – reflecting the clear appetite in Europe to take further RDF from the UK, provided it is on acceptable commercial terms. This demand is unsurprising – the report identifies that, without decommissioning, incinerator overcapacity in northern Europe could rise to between 9.1Mt and 12.1Mt by 2020.
According to our databases, there is circa 5.6Mt of UK incineration capacity currently in construction or where construction is imminent – the latest of which is North Yorkshire. Whilst much of the Residual Waste destined for these new facilities is currently landfilled in the UK, the development of this domestic capacity will almost certainly impact on an increasingly dynamic RDF market.
For example, assume that 0.6Mt (i.e. just over 10%) of this new capacity will end up being filled by waste which is currently being exported as RDF. This is equivalent to just under 25% of the total 2014 RDF exports. If the level of RDF exports is to be maintained an additional 0.6Mt of RDF will need to be found from alternative sources. To put this into context, this is broadly the same figure as the increase in exports between 2013 and 2014, when landfill tax rose by £8/t to £80/t. But in 2015 landfill tax will only increase by inflation.
It is also worth considering the historic development of the RDF market. In order to be competitive early exporters focussed their attention on the ‘low hanging fruit’ – often sourcing RDF from the most readily accessible locations in the UK and delivering the RDF to European incinerators closest to ports. Rising landfill tax then allowed the market to support longer (and often more expensive) export supply chains. RDF exports rose.
But if RDF from the more readily accessible locations is to be diverted to UK incinerators, newly sourced RDF may be a less attractive proposition than the tonnage it replaces. Add in the potential impact of DEFRA’s recent proposals following last year’s consultation and it becomes clear that replacing 25% of ‘lost’ RDF exports will not be straightforward.
Furthermore a number of waste companies are using their growing experience in RDF exports to refine their approach to the market. Many are choosing strategies which balance risk and costs by using a basket of outlets (RDF export, in-house and third party UK incinerator capacity and, where appropriate, landfill) and contract durations. They recognise that whilst RDF exports can be cost competitive, there are short term supply chain risks, particularly where exporters do not have preferential rights of access to European incinerators (as demonstrated by the recent AEB Amsterdam fire). However such a balanced strategy is likely, in time, to limit the tonnages of RDF available for export.
As a result the picture is of an RDF export market which, over the next two years or so, will need to run quite hard to stand still at 2.5Mtpa. As a result, whilst export tonnages may drift above the 2014 level for short periods of time this is unlikely to be so on a sustained basis.
To purchase the Report please visit: www.tolvik.com/reports/
Published in: www.ciwm-journal.co.uk
Author: Adrian Judge