Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 120 - 139)

TUESDAY 23 OCTOBER 2001

MR DAVID HULSE, MR ANDREW MASON, MR STUART COTTAM AND MR SHANE MELLOR

  120. There is value in it for you.
  (Mr Mason) There is value in it for us, absolutely, otherwise we would not be doing it.

  121. Do you charge people at all to take them?
  (Mr Mason) Not at the moment in the scrapyard and shredding sector, although I am aware that some dismantlers have to charge now because they have to pick it up at natural end of life, so there is a charge.
  (Mr Cottam) It depends entirely on markets. If one goes back to the second half of 1998 then, yes, we were charging to take end of life vehicles.

  122. You say, also, in your submission that I think it is 25 per cent is plastics, glass and non-metals. Do you think there is scope there for more development to find ways of recycling that or do you think the manufacturers should do more to assist making that part of the product?
  (Mr Mason) If cars were made more out of aluminium we would be very happy, it is a high value metal. I personally believe there is a great scope for recycling non-metallics as we go forward. I do not think in the next five years there is going to be a wonderful scope there. We are fighting a Packaging Directive which is forcing plastics recycling and the WEEE Directive coming along behind it which will force plastics recycling. You are having a forced recycling rather than a market pulled recycling which I do not think will add a lot of value to the system but I think long term, yes, absolutely, some of the engineering plastics will be like non ferrous metals, they have a high value, but that is in the ten year period, not in five.
  (Mr Cottam) Worldwide there are no proven recycling technologies, not even on a laboratory scale never mind an industrial scale. It is a steep hill to climb.

Mr Djanogly

  123. Your submission notes that the treatment of ELVs prescribed by the Directive does not currently happen in the UK and that, therefore, there are costs involved in this. What sort of ballpark figure are we looking at for an average recycler to invest in the necessary treatment facilities?
  (Mr Mason) For an ATF to invest in a state of the art type rig, you are looking at a shade under £100,000 for a twin rig, a state of the art depollution rig, if you are looking at the top end of it, but there has to be a building and a building has restrictions on petroleum storage because you are removing products from vehicles, etc.. We have just installed one in North London. We will not have any change out of about £240,000 for the building, the storage of the liquids, petroleum licences, changes in working plans and licences and the acquisition of the building in the first place.

  124. £240,000 provides you with the capacity for?
  (Mr Mason) 10,000 vehicles a year for depollution.
  (Mr Cottam) That is the fixed cost, that is the asset cost. There is a variable cost of them going forward.
  (Mr Mason) Staff costs.
  (Mr Cottam) If one takes the ARN model, the Auto-Recycling Netherlands model, that is currently £61 being put to the car to fund the recycling of 100 kilos of materials for the car and to depollute the car.

  125. Okay. For shredding companies, where does the major cost of putting in place the Directive lie?
  (Mr Mason) If you look at the Directive and look at the changes, I think that is probably the easiest way to look at it: the changes from the current operation require us to depollute cars before they are shredded and that will be either the dismantler, the scrapyard or the shredder, anybody can depollute, any ATF. That is a large variable cost. The CARE group estimates £40 variable but that does not include the capital depreciation. We have got to recycle more. We have to recycle plastics and, as I say, I think in the long term that will probably be quite useful, in the short term that will be a cost to us. I think it will cost us more money than we will recover recycling plastics. We then have to have a data collection system. We do not collate data at the moment about which cars are shredded and how much we recycle of each car. Looking at the packaging system the PRNs are not a million miles away from being a data collection system, that will add a cost to the ELV. All those three areas will add cost and the argument is where does that cost get recouped from.

  126. Presumably there is some more cost in having to take more ELVs?
  (Mr Mason) We already shred all the cars in the UK. They do not go to landfill, they go to shredders, along with all the white goods and lots of other materials.
  (Mr Cottam) It is important to understand as well that most of them already do come complete, a significant majority come complete. 50 per cent come direct from the public, it is natural to assume they are complete. You also have the dismantling chain acting as treatment facilities, not stripping any parts but dealing in natural end of life vehicles, for the fee that they can take from the last owner for collecting them from the last owner's drive and for the payment for the materials cost of those cars that they can get from those shredders. It is natural to assume that a proportion of the vehicles going to a dismantlers do not have spare parts removed at the moment. So the argument that we get more complete cars by dismantlers only taking positive value vehicles for spare parts, those vehicles have been dismantled for spare parts now, the ones that do not have a value are not being dismantled.

  127. Perhaps unsurprisingly, unlike the manufacturers, you have said that the costs will ultimately be borne by the consumer. Do you think that these costs should be split across all elements of the chain rather than just consumers?
  (Mr Mason) Looking at our own shredding model, if you like, we sell all our products on commodity markets, so we are selling mostly to Asia and the States. We cannot increase the value of what we sell. They are lumps of metal at base commodity markets. So we cannot increase the value of our products. Can we reduce our costs? Well, everybody can always reduce their costs but our biggest variable cost would be electricity, that is going up with the Climate Change Levy, not going down. Our second largest cost would be the landfill and the 25 per cent residue, that is going up in Landfill Tax, not going down. Our third largest cost would be staffing costs, they are going up, not going down. Our fourth largest cost will be depreciation of equipment, well that is not changing. Whether we can reduce our costs, I think, is limited. We cannot sell our products for any more, what we can do is pay less to the last owner and currently we pay at our London site—I was there two days ago—£3 a car to the last owner. We can stop paying that £3 a car but I do not think that will really cover some of the sizeable costs we are talking about in terms of depollution which may be in the £40 a car region. I cannot see where we can partition those costs off to. Certainly we should stop paying the last owner for their car rather than expecting the manufacturers to fund all depollution and us paying the last owner for that car, we fully accept that.

Richard Burden

  128. How far do you depollute cars now?
  (Mr Mason) Not at all.

  129. All the extra costs you say come from depollution?
  (Mr Mason) The cost in the short term, as in next year, will all be depollution. There will be a bit of data collection cost, which will start coming in, and the recycling of plastics costs, obviously a slightly longer timescale in the Directive.

  130. When you were describing the process now—I am just trying to work out where the extra costs are going to come in.
  (Mr Mason) Yes.

  131. If I summarise what I understand you have said so far it is that at the moment even though natural ELVs have no market value, the recycling of metals for you does have a value?
  (Mr Mason) Absolutely.

  132. You already get a lot of complete cars.
  (Mr Mason) Absolutely, which are not depolluted.

  133. Which are not depolluted. So what do you do with those?
  (Mr Mason) Put them straight into the shredding machine without depolluting them.

  134. Would you not see that without the End of Life Vehicle Directive the trend would be towards more depollution anyway?
  (Mr Mason) I am not sure where the driver for that would come.
  (Mr Cottam) Even if it was, the result would be that we would have to charge the public to take their end of life vehicle, the Directive precludes us from doing that.
  (Mr Mason) Without the Directive, if we were forced to depollute, if that was a £30 a car cost to us then we would have to pass that on to the public. Instead of paying them £3 we would charge them £27 to take it if that cost comes into the system. At the moment, as I said earlier on, the legislation prevents us from putting oil in streams, it does not say we have to take oil out of cars. We have to put infrastructure systems in instead to do that, like oil/water separators in our drains.

Mr Hoyle

  135. Just to follow up on that. Do you not think that the manufacturers ought to take a more responsible line and put more recyclable metals or whatever into that and try and reduce the part that is going to landfill? They have a role to play as well in this.
  (Mr Mason) In new car manufacture?

  136. Yes, in new car manufacture.
  (Mr Mason) Absolutely and I think, to be fair, they do. We are not going to go away from using plastics in new cars. There are a lot of advantages in terms of weight, in terms of fuel, also environmental advantages throughout the life, so we are not going to go away from plastics. I think the manufacturers are generally being fairly sensible in looking at minimising the variance of plastics, the dissimilar plastics which would make it difficult to recycle. If they continue progressing on that line in terms of minimising the variance of plastics then it will help us to recycle plastics in 12 or 14 years' time when those cars come to end of life.

  137. Do you work together on looking at the benefits of trying to recycle to try and get the costs down?
  (Mr Mason) Plastics recycling we see as a good opportunity for us. We currently fund a research project on plastics standards through the British Plastics Federation and some of our staff sit on the Automotive Plastic Study Group.

  138. We would love aluminium cars.
  (Mr Mason) I would love aluminium cars.

  139. I want to take you on to a statement that was made. The BMRA suggests the system must allow for "fair and reasonable access by all stakeholders to the post-Directive ELV management market for our members". They believe that producer responsibility systems for packaging elsewhere have given rise to competition policy issues. What system would you like to see in place for dealing with ELVs and what sort of competition problems do you anticipate?
  (Mr Mason) The competition problem we anticipated there is perhaps looking at packaging in its early days. We had one compliance scheme in the early days so if you were a recycler of packaging you could only really sell your packaging to one compliance scheme, which is perhaps not the most attractive position to be in if you only have one outlet to sell your product to. That was our concern in that particular area. We were concerned about having one collective scheme where we basically have a monopoly sitting above us in terms of who we contract with in terms of recycling cars. I think in general we would probably like to see an Option 1 type process at the moment. We have not seen an official version of the Option 4 as a sector yet, although obviously we are fully aware of the unofficial versions. We would like to see probably an Option 1, however we are fully aware there is a large accruals problem for the manufacturers and that has to be dealt with for them. A direct contract system, obviously large manufacturers will not want to contract with the two or three thousand players in the sector at the moment, that will be a very unattractive structure for them. We envisage service providers will sit there between those doing the work and the manufacturers wanting to contract. I would not see the average manufacturer in the UK wanting to deal with 2,000 current operators.


 
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