Investing in troubled times

Chris Cox, JCB’s General Manager for the Waste & Recycling Sector, looks at how economic uncertainty can affect the industry and how the machine manufacturer faces up to economic downturns.

While plummeting crude oil prices have their advantages for many people, the complex effects a low oil price has on the economy – affecting everything from plastic production to pensions – means that it’s not all good news for those involved in waste and recycling, many of whom are seeing the value of their materials undercut by cheap oil.

Crude oil prices declined to a seven-year low at the end of 2015, with US crude trading near to $30 / bl, and prices have gone lower still since the beginning of 2016. Increased production in the Middle East to counter the USA’s production of shale oil, the release of post-sanction Iranian oil, and a lower than expected demand from China have all contributed to the depressed prices. The oil price isn’t the only factor driving economic uncertainty, but it is so central to our economy that it affects almost every aspect of our lives.

Investment uncertainty

In the short term lower crude oil prices can be good news for machine owners and operators as running costs and overheads are markedly reduced. In the longer term though, there is no doubt that any economic uncertainty can inhibit investment and affect trading conditions. For example, analysts predicted a boom in the US steel industry on the back of the success of shale and the expected expansion of operations, but that hasn’t materialised and investors are understandably nervous about future ventures.

Less investment and changing commodity prices can have a real impact on waste management businesses. A low oil price means it is cheaper to produce new plastic than recycle existing material so there is an inevitability about the direction buyers will choose to go, unless the wider picture is taken on board and our environmental responsibilities acknowledged.

Weather the storm

To be a successful business you have to be able to weather the many storms that come with economic cycles and maintain, or where possible grow, your market share even in the tough times. JCB has always continued to invest in new products and innovate with new technology whatever the economic outlook, so that it can be ready for the inevitable market upturns.

JCB, founded by Joseph Cyril Bamford, was established just after the Second World War – using surplus military supplies such as air-raid shelters and turning them into agricultural tipping trailers – so the company knows a great deal about making the best of a situation and has seen its fair share of economic cycles over the past 70 years.

Better resource management a certainty

Having now worked in the waste and recycling industry for over 30 years, JCB has invested heavily and developed its Wastemaster machines – the widest range of machines for the industry – because it believes that this sector will continue to grow in size and importance over the coming years.

We need to manage our resources more effectively with a growing population, dwindling natural resources and less space available for landfill. A successful circular economy is a must; no matter what economic uncertainties there may be. It is central to the way resources are managed in the future and JCB plans to play its part in that movement.

www.jcb.com

Published on Hub-4 – March 2016