Auckland Council to pay $29m in recycle company bail out.
Auckland Council is bailing out one of the world's largest private recycling companies to the tune of $29 million after China stopped buying foreign waste.
Councillors voted, behind closed doors, to increase the contracted fee to Visy from $2 million a year to $9.2m a year for potentially up tofour years, according to the news sheet Town Hall.
Mayor Phil Goff and council executives would not comment on the contract variation, leaving environment and community committee chairwoman Penny Hulse to front the issue.
What an extraordinarily soft touch this shows our council to be
She said the council was negotiating a higher fee to Visy, but would not comment on the numbers. She believed the Town Hall figures were an informed guess and not accurate.
Nick Baker, the New Zealand general manager of Visy, could not be reached for comment.
Visy handles all of Auckland's kerbside recyclables - about 140,000 tonnes a year - at a large processing plant in Onehunga. Glass and metal products are recycled locally, but paper and plastics are sold offshore.
The Australian-based multinational is one of the largest privately-owned paper, packaging and recycling companies in the world with sales exceeding more than $5 billion.
The bailout follows a ban by China on waste recyclables, causing a collapse in prices, councils struggling to cope and, in some cases, huge stockpiles of unsold plastics and paper. Auckland does not hold any stockpiles.
Workers sorting waste at Visy's Onehunga plant. Source / Auckland Council
In June, Christchurch City Council provided a $3.2m rescue package to its own recycling company, EcoCentral, after the tables turned on the profitable business.
Town Hall, a monthly news sheet produced by consultants McGredy Winder about the goings on at council, said council initially entered into a dispute resolution process with Visy when it claimed its $2m contract was no longer financially viable.
The item said "this robust and reasonable commercial response lasted only until the September finance and performance meeting" where councillors decided to increase the contracted fee to $9.2m a year potentially for up to four years.
"What an extraordinarily soft touch this shows our council to be," said Town Hall, saying the recycling business stood to benefit from the market upside, but councillors have taken on all the downside commercial risk.
Hulse said council had a stark choice of sending recyclables to landfill or pay a bit more to continue recycling, bearing in mind this was a temporary solution.
She said Aucklanders were responsible and recycled well, but there was a growing understanding that sending products overseas and hoping it would go to good markets was not acceptable.
As things became clearer about recycling, it might cost more money and that would drive a bigger discussion about not creating waste in the first place, Hulse said.
Barry Potter, council's director of infrastructure and environmental services, said the biggest impact of China closing its borders was with recycled paper, which made up 46 per cent of kerbside recycling by weight.
Plastic made up only 5 per cent by weight and the council dealt with glass, aluminium and steel within New Zealand, he said.
Auckland had been able to secure new markets for recycled products, primarily in Indonesia and Vietnam, but there was a risk those countries could follow China and ban imports, Potter said.
The Visy recycling plant at Onehunga. Source / Auckland Council
He said the answer with paper and plastics lies with reprocessing these products within New Zealand where there were commercial players and a market existed, but limited capacity at present. It was too early to know if council would get involved, Potter said.
WasteMinz chief executive Paul Evans was not surprised Auckland Council was renegotiating its waste contract with Visy following the massive collapse in international recycling markets.
The price of plastics graded from 3 to 7 had gone from $150 a tonne to zero and it was a similar story for some paper products, he said.
Evans said councils could refuse to increase payments to recycling companies, but that could lead to companies closing and councils having to set up new companies or negotiate new contracts at greater cost.
He said Taupo District Council had stopped collecting graded 3 to 7 plastics because they did not believe there was a market for them.
WasteMinz, which represents the waste industry, business and council on waste issues, wants to improve the quality of kerbside recycling straight away and called for a revised national waste strategy longer term.
