How Russian warfare affects the waste industry in Europe

By Ralf Schöpwinkel, Geminor

The waste industry is among the first to receive signals of significant economic change in society
The waste industry is among the first to receive signals of significant economic change in society (photo: Geminor)

The biggest pandemic in modern times is barely over when Europe experiences a new crisis. The conflict in Ukraine poses challenges for the waste and recycling industry in several areas.

The consequences of Putin’s fateful march into Ukraine on the 24 February is beginning to show on the European continent. First and foremost, we are witnessing the terrible suffering of the Ukrainian people, but the Russian invasion also creates economic and logistical headaches and offers serious side effects we do not yet see the extent of.

As with several other industries, the war in Ukraine is creating an imbalance for many waste and recycling operators around Europe. Admittedly, this is an imbalance the industry already had a taste of during COVID, but the challenges we faced last year are now amplified in several areas and contribute to further uncertainty in the waste markets in Europe.

The following factors in particular are shaking up the waste and recycling industries in times of war.

Shortage of waste as feedstock
The waste industry is among the first to receive signals of significant economic change in society. Household consumption and the business sector’s production level directly affect the total amount of waste. These volumes will always vary, but the significant drop that we currently are witnessing leads to a shortage of feedstock for sustainable material recycling and energy recovery. The war in Ukraine is creating further uncertainty by cooling the economy and reducing consumption in Europe.

An example of the current feedstock shortage can be found in the supply of wood. Russia has for long been a significant supplier of timber and bio-chips to both the panelboard industry, the paper industry and to the WtE-plants that use wood chips as fuel. With new sanctions imposed, these exports are stopped more or less overnight. The European waste market lacked waste wood even before the war began, resulting in higher prices. This is also a challenge for the WtE plants, which compensate for lacking household and commercial waste by incinerating wood.

The fact that biomass is in short supply is something that various industries will experience, and something that creates challenges for energy recovery plants with strict sustainability requirements.

Increased transportation costs
As if there were not enough challenges for the transport industry in Europe already, the war also affects the transport capacity on the continent. This is something the waste industry, like others, suffers from. An acute shortage of drivers reduces transport capacity, and when the many Ukrainian drivers now return home to protect their country, these challenge increase.

In a short time, vessel fuel has doubled in price, and the diesel price for road transport has never been higher. This extra cost is added to transport prices, which very much affects the price-sensitive waste industry.

At the same time, Russian bulk carriers are leaving the supply chain, which also limits capacity in maritime transport. Rail transport cannot compensate for the lack of other transport services at present.

Increased energy prices
The prices of electricity and fossil energy are closely linked, and although gas still flows from Russia to Europe, the war has significantly increased operating costs for many industry players. The current and extremely unusual electricity prices force several recycling players to a temporary stop in production. This is the case for several cardboard and paper recycling (RCP) mills in Europe.

An unpredictable market
The EU’s Emissions Trading System (ETS) is also affected by the war in Ukraine. On 3 February, quotas were traded at EUR 94 per tonne. Following the invasion of Ukraine on March 7, quotas were priced as low as EUR 58 per tonne but are back at EUR 80 more recently.

The waste market, which is based on spot trading, becomes unpredictable as prices quickly change. For energy recovery plants that are used to long-term and predictable market conditions, the fluctuating prices and gatefees is a challenge that comes on top of a shortage of secondary fuels. The cross-border transport of waste, which is regulated through the Transfrontier Shipment of waste (TFS), involves applications that normally can take several months to get approved, adding to the uncertainty many players are facing this spring.

If the war in Ukraine can teach us anything, it would be that the entire value chain quickly becomes vulnerable when market mechanisms, in combination with emission quotas and other regulations, undergo unforeseen changes. Broad international cooperation – giving easier access to feedstock throughout Europe – would reduce the risks and open for a more stable waste market in future crisis situations.

Ralf Shöpwinkel, Chief Operating Officer at Geminor
Ralf Shöpwinkel, Chief Operating Officer at Geminor