Recycling in Ukraine remains risky business due to problems with raw materials – Biosphere manager

KYIV. Sept 3 (Interfax-Ukraine) – Lack of stable supplies of raw materials is one of the key problems of the recycling business and investments in it, which will be difficult to solve without the adoption of special legislation on the rules of the game in the waste management industry, General Manager for Household & Recycling at the Biosphere Corporation Yuriy Holianych has said.

"If there is no stable source of raw materials supplies and stable sales, then this is a rather nervous business, because you are constantly balancing on the brink," he said in an interview with Interfax-Ukraine.

Holianych said that the Polygreen plant, which is part of the Biosphere corporation, was built within the framework of vertical integration and operates in a narrow segment of polyethylene film, primarily LDPE and LLDPE, producing pellets for the corporation’s subsequent release of garbage bags.

According to him, the enterprise, with a design capacity of 900 tonnes per month, is loaded by about 850 tonnes, while there are more problems with finding raw materials for the second line of 400 tonnes, which needs it of a sufficiently high quality.

The general manager added that, in general, the enterprise manages to load its capacities at the expense of specialized operators, although certain problems arose after the EU introduced new licensing rules for the export of recyclable materials, in particular to Ukraine, on January 1, 2021.

"For us, it [imports from the EU] accounted for 10% of the total volume of recyclable materials that we collected, since we were fundamentally customized to collect raw materials from the Ukrainian market," Holianych said.

According to him, smaller participants in the recycling market, focused on the B2B market, have more problems.

"There are many small recycling plants that recycle. I think that several tonnes a month are produced there. But it depends very much on seasonality, because most companies do not have vertical integration," the expert said.

The representative of Biosphere added that before solving the problem with raw materials, the corporation still considers recycling as a part of vertical integration, but in the future it is ready to enter the B2B market.

Talking about ways to eliminate the risk of instability with raw materials in the market, he called for legislative regulation of the waste management industry and monetization of the sector.

"Until there is no law that establishes the basic rules, investments in this sector are simply ineffective, because there is no monetization. Waste processing plants, if these are full-fledged projects, cost tens of millions of dollars or euros, it is a very long investment. And the concept of monetization is important, even if the state takes this role and makes such plants part of a large construction project," Holianych said, adding that any law is better than no law at all.

"It seems to me that as soon as the legislative framework appears, the notorious invisible hand of the market will regulate itself. There is no need to try to impose any monopolies, but simply to allow companies to unite, as private initiatives or public-private ones," he added.

As regards the monetization scheme, Holianych expressed the opinion that it is possible to do this through tariffs or through payments from enterprises.

"Either through both of them, which, most likely, we will have implemented. As soon as these two conditions appear, the industry will immediately appear, and we, as recyclers, will breathe easy, because we will understand that we will have a stable supply of raw materials. And then we will start looking at what else we want to recycle: plastic bottles, caps and one thing leads to another. Then an industry appears," the representative of Biosphere said.

According to the public register, Polygreen Company (Fastiv, Kyiv region) in 2020 received UAH 1.16 billion of net profit with UAH 18.57 million in revenue.