The principle is that fees will be adjusted each calendar year. Why are the fees being raised as early as October?
The principle for packaging fees is that they apply for the entire fiscal year, and that new fees come into effect on January 1 and remain unchanged for the full year. Unfortunately, we need to depart from that principle this year because of the COVID-19 pandemic, which had a major impact on the plastic recycling industry in particular.
Why are the fees for plastic packaging being raised so sharply, and already by October 2020?
During the year, Svensk Plaståtervinning was affected by lower profitability, mainly due to direct and indirect effects arising from the COVID-19 pandemic, which has forced us to adjust the fees by as early as October 1, 2020. The aim is to postpone the next adjustment until January 2022, in line with the ordinary time frame. The effects of the COVID-19 pandemic, which have led to an earlier adjustment of the fees, are linked to increased costs for waste collection and recycling as well as lower demand for sorted plastic fractions, which have reduced sales revenue.
The European plastic recycling market is facing a paradigm shift where the actual recycling rate will be measured as of 2020. The recycling target for producers of plastic packaging in the member states is 50 percent by 2025.
Svensk Plaståtervinning has adopted a strategy to achieve a recycling target of 55 percent by 2025, which will lower our producer customers’ emissions and strengthen their competitiveness. We call the initiative Plastsprånget 2025 (Eng: the Plastics Leap 2025). Plastsprånget includes the necessary investments in infrastructure for both collection and recycling. To implement Plastsprånget and the planned expansion of curbside collection services, we need to build financial strength and sustainability in Svensk Plaståtervinning, which has been adapted for the task. That will require a 60-percent fee increase, which is a major hike in terms of a percentage, but will also bring our packaging fees into line with other European countries.
Our goal is to achieve the lowest recycling costs in Europe by 2025.
Why are the fees for metal packaging being raised so sharply?
There are two reasons for the sharp increase. Firstly, a principle equalization between aluminum and steel, and secondly, an increase linked to rising costs in the collection chain now, and the need to build a financial basis for investments moving forward.
In the previous fee structure, steel and aluminum were equally distributed in the overall collection, which did not pose a major problem since the revenue generated by each material financed a large proportion of the costs. The revenue for aluminum per kg is higher than for steel. However, this relationship has changed in recent years and since the basic principle is that every material should bear its own costs, the fees need to be adjusted. The collection costs for packaging are the same for both aluminum or steel, but since aluminum is three times lighter than steel, the price per kg for aluminum packaging should also be three times higher. The fee will then reflect the cost, regardless of whether the producer has elected to place steel or aluminum packaging on the market.
Regarding the second reason, the packaging fees for metal have remained stable for many years and are now at the same level as in 2016. We can see that costs in the collection chain are increasing, and to cover that while also building a financial base for the future, we need to raise the fees.
The fees for paper packaging have not risen much by comparison. Why is that?
We can see that this year’s fees for paper packaging will cover the increased costs linked to the COVID-19 pandemic this year. The fees will be raised by a few percent from January 2021. The main reason for the increase is to cover the fall in prices for recycled materials, and to prepare for the expansion of the future collection scheme.
Will the prices remain unchanged in 2021, or is there also a risk of increases during the year?
Our basic principle is that fees are adjusted on January 1 and remain unchanged during that fiscal year. The aim is therefore to postpone the next adjustment until January 2022. Factors that could have an impact are fundamental changes to legislation or recycling targets. We provide regular updates on any changes.
We would also like to emphasize that we are transparent in terms of how we work and our packaging fees. The packaging fees reflect the actual costs of the collection and recycling scheme, less the revenues generated by the recycled materials. We do not raise the fees by any more than is necessary to run the scheme, which is evident from the fees for paper packaging in this particular case, where this year’s fees have covered the volume increase we experienced during the spring, and the upcoming increase has therefore been scheduled for next year.
How are the fees calculated and what are they based on?
The fees are calculated on the basis of assumed packaging volumes in the Swedish market in FTI’s collection scheme, collection costs based on forecasted collection volumes, recycling costs and revenues based on forecasted collection volumes and estimated prices for recycled material.
The principle is that every type of material should bear its own costs, with no cross-subsidization between the categories. Every type of material is handled competitively neutral.