Why digitalization is essential to the globalization of recycling logistics

Recycling markets are changing. Moving materials around the world is changing.

Legislation in many countries now makes exporting harder, shipping lines are disrupted by new consumption patterns and international events, and the circular economy promises to bring new opportunities too.

So how do you ensure you are able to keep moving material? Digitalization is the key.

We live in an interconnected world where manufacturers source raw materials from many different countries and regions. Increasingly, Governments are looking at increasing use of recycled materials, especially through policy such as plastic packaging taxes and other incentives.

With consumer and industrial goods manufactured in multiple countries, with parts and raw materials sourced from a variety of other nations, the recycling market needs to act as an integral part of the supply chain. This means you need digital tools to operate logistics efficiently. 

But recently, the global manufacturing and recycling sector, has been tested by the Covid-19 pandemic and other events, and key lessons have been learned.

Supply and demand pressures – what does this mean for the recycling sector? 

In the recent World Trade Organization (WTO) Global Supply Chains Forum, it was noted that: “The pandemic has caused continued supply and demand pressures, congested ports, shipping logjams, rising inflation, increased freight rates and shortages that are disrupting global trade.”

“The conflict in Ukraine has also led to severe disruption of supply chains particularly in grains, metals, and energy products.  Other factors cited by shipping lines, port officials, shippers and analysts as hampering supply chains were labour shortages, land-based bottlenecks, and underinvestment in infrastructure.” (Source: WTO)

This situation has also affected the trade of recycled materials, with exporters having to deal with these supply and demand pressures, plus logistical challenges in moving materials when container availability has been challenging.

Despite these difficulties, in 2021, rising prices were experienced for many grades, with paper and plastics seeing record price levels. Strong demand as economies came out of Covid lockdowns and restrictions, plus shortages of materials arising from homes, retailers, and manufacturers, meant that values headed upwards.

When Russia invaded Ukraine, this added impetus to this, especially for plastics and metals. High oil and gas prices have pushed up the price of virgin polymers, and this has increased the value of plastics. For metals, supply issues from mines have kept prices high, albeit volatile. 

As an example, PET (Polyethylene terephthalate) bottles in the United States were trading at just around $500 prior to the Covid period, but by March 2022 had reached $800.

Copper in late 2019 was trading close to $5,500 dollars but was over $9,000 dollars in March 2022. 

Record prices were seen in some regions for OCC (Old Corrugated Cardboard), with some UK trades into Europe and Asia happening at over £170 per tonne ($225). Prices like this had never been seen before but seemed to have reached a peak at the time of writing. 

Changing markets

Prior to Covid-19 and the current situation in Ukraine, the globalized economy was changing. Although in recent decades globalization has tended to see demand coming from advanced nations, and supply from Asia in particular, value chains are now being redrawn.

Consultancy McKinsey estimates that two thirds of the world’s manufactured goods will be consumed by emerging markets by 2025, with products such as cars, building products, and machinery leading the way. 

By 2030, developing countries are projected to account for more than half of all global consumption.

Within this global economy, there will be strong demand for raw materials and products. With these pull-on resources, a more circular approach will be needed so that resources remain within world markets.

Indeed, strong demand is coming from Asian markets. Although China banned import of plastics and mixed paper in 2018, and all paper grades at the end of 2020, its pull remains strong. China continues to buy fibre and plastics from countries in Southeast Asia as well as India.

However, economies such as Vietnam, Thailand, Indonesia, and Malaysia have all introduced bans on some grades or at least tougher inspection regimes following China’s example. In both China and these countries, part of this was to encourage development of better resource capture in their own economies through improved waste management processes. 

This is an attempt to keep materials for their own manufacturing sectors, but also to ensure they supply of recycled raw materials they receive is higher quality. 

There is also a trend towards onshoring of material with UK waste management company Biffa explicit in its goal towards treating all the secondary commodities it handles within the UK for example. 

However, by necessity of a global economy, there will always be a need to transport materials back to manufacturing centres across the planet. 

Digitalization

Globalization presents opportunities. The same report mentioned above from McKinsey shows that China is consuming more of what it produces due to a growing middle class of consumers. The same trend is being spotted in India, Indonesia, Thailand, Malaysia, and the Philippines, leading a developing world outside of China that is expected to account for 35% of global consumption by 2030. 

But in North America and Europe, one-way major businesses are also responding to these pressures is by investing in solutions closer to their home markets.

“We've noticed that large companies are shifting their production closer to Europe's borders, showing a preference for the Middle East over Asia. I have identified nearshoring as a clear trend in the logistics industry because of the coronavirus pandemic,” says DB Cargo management board member for sales Pierre Timmermans. 

“This is how the supply of basic goods has been ensured even during the pandemic.”

In the recycling sector, this trend for nearshoring has also been driven by global legislation. For example, new rules under the Basel Convention meant that many plastics could only be traded without notification between OECD countries. In Europe, this has effectively meant that plastics trade is between other European nations and Turkey.

Additionally, proposed European Union changes to the Waste Shipment Regulations would make trade with other non-EU nations difficult, if not impossible. Organisations such as EuRIC (European Recycling Industries Confederation) are lobbying for measures that punish illegal exports, without dismantling global trade of recyclate as part of the circular economy. 

Digitalization is one way to combat some of the challenges involved in exports. It allows companies that export recycled materials to fully understand what materials they have, the quality of it, where it is, and ensure paperwork is in place for regulatory and customs authorities.

Indeed, manufacturers globally are digitalizing their processes to ensure they have the supply of raw materials and components they need. For the recycling sector to be part of this process, it needs to match the digital methods suppliers of virgin raw materials operate to work with their customers. 

According to Timmermans, the Covid pandemic has shown the need for increased digitalization in the logistics sector. 

This means investing in technologies to track supply chains, introducing digital inventory forecasting and dispatch, and implementing comprehensive capacity planning. These are tools offered by the AMCS Platform for the recycling sector. 

Indeed, digitalization of logistics and supply chains was supported by the WTO Global Supply Chains Forum. At the event, International Chamber of Commerce secretary general John Denton added: “If you want resilience, you have got to ensure access to digital skills, but also digital platforms. 

“That also means you’ve got to make some bold reforms in terms of the digital economy.”

Participants at the event said that digitalization would be key to “reducing global supply chain congestion.”

Investing for globalization

Global manufacturing patterns are changing. Whether that is advanced economies sourcing manufacturing nearer to their bases, or the rapid economic growth of certain developing economies, supply and demand pressures for resources will remain global.

Those recycling and waste management companies that have clear data on their inventories, strong intelligence on customer buying patterns, understand currency fluctuations and have software designed to maximise trading will have a clear advantage when it comes to taking the opportunities that globalization offers.

While the Covid pandemic and the crisis in Ukraine have tested supply chains, it has also demonstrated the need for investment in innovative technologies that will ensure resource use is maximised in a globalized and economically growing world. 

Learn more about how you can digitalize your recycling logistics with AMCS Recycling Platform.