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Product Stewardship Study - Whiteware Sector

Preamble

Executive Summary

1 Introduction

2 Overview of the Whiteware Sector in New Zealand

3 Environmental Issues Related to Whiteware

4 Current Whiteware Product Stewardship in New Zealand

5. Performance Against Current Government Policy Objectives

6. The Role of Regulation and Other Interventions

7 Lessons Learned and Key Recommendations

References

Appendix 1: Whiteware Collection and Processing Flow: Fisher & Paykel

2 Overview of the Whiteware Sector in New Zealand

2.1 About the product category - whiteware

For the purposes of this study whiteware is defined as domestic versions of:

• refrigerators and freezers;
• clothes dryers;
• washing machines;
• dishwashers;
• ovens, stoves and rangehoods;
• waste disposers;
• air conditioners/heat pumps;
• dehumidifiers;
• microwave ovens.

Whiteware is made predominantly of steel, as can be seen in Figure 1, below. This steel component varies according to appliance, ranging from 90% for clothes driers and cookers to under 60% for dishwashers. The presence of metal is a major factor in the economic viability of whiteware recycling. Steel yields a relatively small price (less than NZ$200/tonne) while non-ferrous metals have significant monetary value. Copper, one of the common non-ferrous metals in whiteware, has a current market price in excess of NZ$5,000/tonne and is continuing to become more expensive due to a global shortage in supply. [See for example:Copper, Zinc Climb to Records in London Amid Supply Concern, fromwww.bloomberg.com10 April 2006.]

Figure 1. Material composition of whiteware

Source: ICER, 2000. [Industry Council for Electronic Equipment Recycling (ICER) (2000) UK Status Report on WEEE; London.]

The material composition of whiteware shown in Figure 1 is for equipment at the point of disposal. The data therefore represents the composition of older products. There has been a trend towards greater use of plastics in whiteware for many years and it is, therefore, likely the levels of plastic in end-of-life whiteware will change considerably in future years. For example, it is approximately 40 years since plastic liners replaced porcelain enamel liners in refrigerators. In fact, the trend towards greater use of plastic has probably slowed down significantly in the last five to ten years. The industry reports this move towards greater use of plastic has just about run its course because there is a technical limit to the quantities of plastic that can be used in items of whiteware. The percentage level of metals in products has remained approximately the same apparently, indicating that it is other materials that have been substituted with plastic eg glass shelves in refrigerators being replaced by plastic shelves in many designs, although glass is making a resurgence in current models. Electrolux has moved from wire-coated shelves in refrigerators to glass shelves. The primary reason, according to Electrolux, relates to consumer benefits in food safety. The use of glass may reduce the overall plastics content and introduces another recyclable material. Electrolux noted that anecdotal evidence suggests plastic shelves can become brittle and are prone to cracking, necessitating replacement.

In relation to overall product life span and average age of whiteware an Australian study on major appliances (Environment Australia, 2001: iv) outlined a range of estimates:

The Australian Major Appliances Materials Project noted that:

"These are estimates of the age of appliances when discarded. There is no information on the age of appliances that are recycled or landfilled. However, anecdotal evidence suggests that many appliances that are discarded have reached the end of their useful life and cannot be reused. The life spans quoted do not take into account 'storage' time; it is estimated that between 5% and 33% of broken of replaced appliances are stored for a round two years for use as a 'spare' or merely because people do not know what else to do with them."

2.2 Scale of the market

An estimated 600,000 whiteware units are sold in New Zealand every year. [Market research information, provided by Fisher & Paykel Ltd.] Sales of whiteware have grown significantly over the last five years. Total sales have risen from 400,000 units in 2001, representing a 50% growth. This sales growth has been due to population growth, a new housing boom and the strong economic conditions in New Zealand over the period.

It should also be noted that the market is not saturated in some categories eg dehumidifiers, heat pumps, air conditioners and, probably, range hoods. Note that range hoods are made in New Zealand by Robinson Industries (Robinhood) and possibly other manufacturers also.

Approximately eight million items of whiteware are now owned by New Zealand households. [Statistics New Zealand, Household Economic Survey 2003-2004.]

2.3 The geography of production - local manufacture and imports

More than half of the whiteware sold in New Zealand is imported. In 2005, approximately 330,000 units were imported into New Zealand, representing 55% of the total market.

Figure 2. Country of origin for New Zealand imports of whiteware

One-third of whiteware imported into New Zealand came from Australia; 20% from China; 19% from Italy, 10% from Germany, and the remainder from elsewhere in the world.

2.4 Brand owners - the competitive landscape

The New Zealand whiteware market is characterised by a single, dominant domestic manufacturer and distributor (Fisher & Paykel Appliances Ltd) whose products represent as much as 50% of the total whiteware market. Fisher & Paykel also imports and distributes Whirlpool appliances and some appliances from other manufacturers that are re-branded Fisher & Paykel.

Many other brands represent the other 50% of the market, including (but not limited to):

AEG, Ariston, Asko, Atlas, Baumatic, BSH/Bosch, Carrier, Daikin, DeLonghi, Electrolux, Fujiair, Fujitsu, Haier, Ilve, Jennaire, Lemair, LG, Liebherr, Maytag, Miele, Mitsubishi Electric, Panasonic, Rangemaster, Samsung, Sharp, Simpson, Smeg, Teba, Telmann, Vestfrost, Viking, Westinghouse.

Electrolux (and the other brands it owns) have a physical company representation in New Zealand, although all whiteware is imported. All other brands are imported and distributed by third party companies, or appliance import groups. A more recent trend in the market has been retailers direct importing, relabelling appliances and selling under a brand name they own.

There are four different models for appliances entering the market in New Zealand.

i. Fisher & Paykel exclusive dealership agreements

Fisher & Paykel represents as much as 50% of the domestic whiteware market. Fisher & Paykel holds exclusive dealership agreements (EDAs) with approximately half of all appliance retailers in New Zealand. Under these agreements, retailers are restricted to only selling Fisher & Paykel and Whirlpool-brand washers, dryers, dishwashers and refrigerators.

This is a unique arrangement and gives Fisher & Paykel significant leverage over the retailing of its products. In Auckland, Fisher & Paykel delivers appliances directly from its plant in East Tamaki to consumers that have purchased appliances through EDA retailers. This provides an excellent opportunity for Fisher & Paykel to reduce logistics costs and enables easy return of their customers' end-of-life equipment.

ii. Manufacturer import and distribution of own brands

Some manufacturers have a presence in New Zealand, but do not manufacture here. Companies in this category include Electrolux, Bosch and Haier. These companies import their own brands of whiteware and distribute them to retailers. Currently, Electrolux's primary method of distribution is through the retailer network, however, the home delivery service is offered in Auckland with a view to expanding it through other major centres. This reduces handling costs and provides an opportunity for the company to easily return its customers' end-of-life equipment.

iii. Appliance importer and distributor

The majority of the rest of the whiteware brands are imported and distributed by third parties. These are specialised importers or buyers groups that act on behalf of a group of retailers. For example, the Applico Group imports, while Appliance Connexion is a retailer buying group (not an importer of whiteware). Other examples of such groups include Monaco (Mitsubishi), Rankins (LG) and Southfort (Miele).

iv. Retailer direct import

Some retailers, including supermarkets, have begun importing whiteware directly to their stores. The Warehouse, for example, now imports a small number of its own-branded whitegoods (Telmann). Other examples of retailers importing whiteware directly include K-mart (Mistral and other brands), Mitre 10 (Nouveau, and Countdown).

The actual market share of companies in the whiteware sector varies according to the different appliances. Overall market rankings for products to market are estimated by industry sources as:

1. Fisher & Paykel;

2. Electrolux NZ (includes Westinghouse, Simpson, and AEG);

3. Applico Group (SMEG, Baumatic, Classique, St George, Viking);

4. Bosch;

5. other producers and suppliers.

There is no official market data to confirm these rankings, however, it is estimated that:

• Fisher & Paykel Appliances holds approximately 45% of the market in New Zealand;
• Electrolux New Zealand holds approximately 20% of the market in New Zealand;
• the remaining producers, suppliers and brand owners collectively represent approximately 35% of the market in New Zealand.

While these figures may be slightly elastic, the proportions indicate a sense of how the market is divided. Importantly, it could be concluded that approximately 35% of the market in terms of producers, suppliers and brand owners, do not have any recovery and recycling-related product stewardship activities in place. This represents a significant figure in terms of non-activity among producers in the New Zealand whiteware sector and thus offers considerable scope for improvement and change.

2.5 Local authorities

Local authorities have responsibility for managing domestic waste and recycling in their geographical areas. There are two ways in which local authorities collect whiteware from households:

• separation at recycling centres/refuse transfer stations/landfills;
• collection at annual kerbside inorganic waste events.

Some councils divert resalable whiteware through stores at their recycling centres. A particular example is the SuperShed operated by Christchurch City Council. Others simply collect quantities of whitegoods at their collection sites and a scrap metal dealer will visit, crush the appliances with a mobile crusher, and pay the council a price according to the market rate for scrap. The collection of scrap metal, including whiteware, often brings in revenue for councils, although this depends on geographical location. After they have collected and crushed the whitegoods, scrap metal dealers will sell the material to Sims Pacific Metals Ltd for shredding.

In many council areas an annual, or biannual, inorganic kerbside collection is run by the council. Inorganic collections provide an opportunity for scavenging of whiteware by the community, either for reuse or for scrap metal value. Any whiteware remaining when the council collects is diverted for recycling as with the whiteware collected at recycling centres.

There is no data available on the number of councils that collect whiteware for recycling, or on the total quantities collected.

2.6 Recyclers

There are only two shredders in New Zealand capable of processing scrap whiteware. Both of these shredders are owned by Sims Pacific Metals Ltd - the largest metal recycling business in New Zealand. Because whiteware uses a relatively light grade of steel, it is mixed with heavier grade items such as whole car bodies and processed through the shredders. Ferrous and non-ferrous metals are separated for recycling. The remaining material is known as "fluff" or "floc" and is made up of non-metal materials, such as plastics, wood, glass and rubber. It is estimated that 28-30% of the total material entering the shredders is floc, which is subsequently landfilled. Given current processing infrastructure and material values, this co-mingled and sometimes contaminated residual waste is not being recycled. While the constituent material types (eg glass, plastics, wood) might be technically recyclable, their co-mingled nature does not allow cost-effective recycling.

Sims Pacific Metals estimates 70% of whiteware entering its shredders comes from local authority collection programmes. [Charlie Carlyon, Sims Pacific Metal Ltd, personal communication.] The remainder comes from producers' take-back systems. Sims Pacific Metals does not have data on the quantities of whiteware processed through its shredders. This is because whiteware usually arrives mixed with other metal waste.

2.7 Summary of observations

There are some key differences in the way that brands are distributed in New Zealand that may influence the way product stewardship for whiteware is established. Fisher & Paykel manufactures domestically and, in the Auckland region, delivers directly to households. This direct delivery allows the company to easily return equipment to its plant for recycling. Electrolux also uses a home delivery model throughout New Zealand, providing the same opportunity to collect old equipment from its customers.

There are also significant differences in how brands are retailed. The unique conditions of the Fisher & Paykel exclusive dealership agreements give the company an opportunity to collaborate with retailers on how products are handled and associated logistics issues concerning collection of end-of-life whiteware.

It appears that the single most significant avenue for collecting whiteware at present is through local authority initiatives. It is estimated that as much as 70% of recycled whiteware is collected through local authorities.

There is no data available on the total quantities of whiteware collected in New Zealand. However, all industry sectors and local authorities believe that as much as 95% of all whiteware is being recycled in New Zealand. This is a relatively high recovery rate and compares favourably even with mature sectors - such as cardboard and paper - for recovery purposes. The key factor determining this high rate is the market value of metals in whiteware. It should also be noted that these percentages may look very different should sub categories of whiteware be further investigated. For example, it is unknown whether the recovery rate for microwave ovens or domestic air conditioners would be as high.

It is also highly likely that second-hand dealers and whiteware service and repair businesses feature along the whiteware life cycle, and that they also provide a source of end-of-life product for recovery and metal recycling. However, data about volumes being processed through such routes is not currently available.