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The rubbish business, especially the imported rubbish business, has become a very profitable business, estimated to be worth almost half a billion euros, a Frames analysis shows. From plastics, tires, metals, chemicals, construction site debris to clothing, footwear and other second-hand products, tens of thousands of tones of waste are imported every year and, amid legislative loopholes, Romania is being turned into a “Western dumping ground”, the analysis says. Beyond the official data, those reported by companies to the Ministry of Finance, the consultancy estimates that business in the garbage sector is actually at least double.
“Wholesale trade of waste and scrap” and “Retail trade of second-hand goods” are the most commonly used CAENs under which more than 3,000 companies in Romania do business with waste.
This type of business has generated increasing interest over the last 10 years: the number of firms has grown from 1333 in 2010 to 3395 in 2020.
According to data from the Trade Register and the Ministry of Finance, consulted by Frames, their business exceeded 425 million euros in 2020 (2.09 billion lei), up by 175 million euros (860 million lei) compared to 2016 (1.23 billion lei).
Their profitability also evolved spectacularly, from 47.3 million lei in 2010 to 182.1 million lei in 2020.
Frames estimates that business in this sector will reach €510 million in 2021, a development influenced by the recovery of economic activity after the COVID pandemic, rising inflation and the increasing focus in countries of origin on clean activities.
“We are talking about a business that has taken advantage of legislative loopholes and brought huge quantities of waste into Romania in the form of ‘second-hand products’ and ‘raw material for recycling’. The recent discoveries made by the authorities in the Port of Constanta, in the towns bordering Bucharest and in other major cities in the country confirm the size of this business, which has grown exponentially in recent years,” says the Frames analysis.
The peak of turnover was reached in 2011, when specialized firms reported revenues of €736 million.
“Recycling, waste management, is just a façade”
According to experts, one proof that many of them deal exclusively in importing waste is statistics showing that 3303 of the 3395 legally registered firms have up to 10 employees and only 4 operate with more than 100 employees.
“Recycling, waste management, is just a façade under which many of the companies do nothing more than import rubbish and dump it in various places in the country. In Romania, the recycling industry, with small exceptions, exists more on paper or in advertising spots. Too few companies really do this, for this process requires important investments and the profitability is not very high”, says Adrian Negrescu, Frames manager.
A further proof of how business is done in this sector is the size of the stocks, which evolved from 234.7 million lei in 2010 to 453.3 million lei in 2020. In other words, many companies bring in waste and store it, without recovering it later.
Most companies in this sector operate in Bucharest-Ilfov (382), Hunedora (225), Cluj (159), Dolj (151), Bihor (126), Gorj (119), Timiș (117), Bistrița-Năsăud (116), Mureș (113), Argeș (108), Buzău (107), Constanța (87).
Black market for waste
Beyond the official data, those communicated by the companies to the Ministry of Finance, the consultancy estimates that the business in the waste sector is actually at least double.
“Tax evasion in this sector is very high, a fact confirmed by the authorities. Undervaluation of shipments is a common practice. In addition, there are a lot of ghost companies in the waste import chain, designed to lose the trail. Proof that, of the 3395 legally registered companies, the vast majority (2314) report business of up to 100 thousand lei. 721 have business between 100,000 – 500,000 lei and only 200 have business of over 1 million lei”, the analysis shows.
Most imported waste comes from the EU, from countries such as Germany, Belgium, the Netherlands, Italy and the UK, but recently cases of imports have also been discovered from Japan, China, Saudi Arabia and Hong Kong.
One example given by analysts: the Environment Guard, together with the Coast Guard, Consumer Protection Constanta and the Constanta South Agigea Customs Border Office, recently discovered an illegal shipment of used agricultural machinery in the port of Constanta. In the container were agricultural engines, components and devices that can no longer be used or recycled in the country of origin. The shipment was returned to Japan, the country of origin.
Most of the waste is expensive to destroy or recycle, ranging from scrap metal to oils, other chemicals, computer components and cars. For the exporters and the middlemen in Romania it is a profitable business, with the profit for a single container of 10 tonnes of waste being up to €100,000,” say the analysts.
The ‘second-hand products’ gateway
Most waste enters the country by taking advantage of legislative loopholes in the second-hand goods trade, Frames representatives say. In other words, in addition to clothes and footwear, destroyed computers, scrap metal, etc. also appear as second-hand goods in the paperwork.
In addition, the authorities don’t have enough scanners to monitor the goods in the containers, so it’s almost impossible to detect and stop all imports.
“Most often the term ‘raw material for recycling’ is written into the paperwork. In reality, more than 70-80% of the cargo is impossible to recycle and ends up in illegal dumps that have sprung up in many parts of the country. Essentially, huge dumps are made where toxic materials, metal parts, computer casings, etc. are buried. If it were recycled, it would cost over €1200 per tonne. So by exporting them, the costs are lower, you pay only 200-250 euros per tonne and you bring them to Romania,” the analysis shows.
Another ploy used by importers is to pass them off as second-hand products, with potential for sale on the Romanian market. Under this umbrella, thousands of tonnes of products that are almost impossible to recycle, from plastics to car parts, etc., end up in the country.
“This is a generalised phenomenon, a phenomenon based on the rule that allows raw material to be brought into the Member States from another Member State – and this applies to all Member States – for recycling. What is brought into these declared containers is raw material for recycling. Declared, because very often there is something else in the containers than what is declared. This is what we saw last time in Constanta, when I was on the spot”, Environment Minister Tanczos Barna said recently.
The Environment Guard discovered around 140 waste containers this year, compared to 31 in 2020. In other words, around 3,700 tonnes of waste were discovered this year, which was on its way to Romania.
The fact that the authorities have stepped up controls is a welcome development given that only 150 illegal waste containers were discovered at the border between 2015 and 2012, analysts say.
“Car scrapping market a public menace”
Beyond imports of second-hand clothes and shoes, the Romanian market has been invaded in recent years by old cars brought from Western countries. It’s another way of getting rid of waste, but with a double danger, say analysts.
They point out that, amid rising taxes and a focus on cleaning up cities, old cars (most of them over 15-20 years old) are imported into Romania, and many of them, by the thousands, end up in so-called scrapyards on the outskirts of many towns in the country.
According to the analysis, beyond the management of metal and plastic waste, a veritable market in car wrecks has developed which, apart from tax evasion, generates a real danger in terms of road safety.
With many car owners unable to afford to buy new spare parts, scrapped parts have become an alternative. The problem is that these parts are not checked and their fitting can cause problems in traffic. The authorities should intervene in this market, control more closely how this business is run and regulate their operation more strictly,” say analysts.
Frames’ analysis of the waste market in Romania was carried out for one of its clients, based on public data reported by companies to RECOM and the Ministry of Finance for the period 2010-2020. The statistics refer to activities with CAEN codes 4677 – ‘Wholesale of waste and scrap’ and 4779 – ‘Retail sale of second-hand goods’. The statistics took into account figures reported by 3395 firms, of which 3148 in operation and 7 in insolvency.