The Covid-19 crisis has shaken all oil-consuming sectors, like never before. The significant slowdown in industrial activity, and the automotive industry coming to an almost complete standstill (certain studies indicate a drop in workshop activity of between 96 and 99%, in the second half of March and throughout April) have caused a drop in the lubricants market of over 60%.

In the case of waste management activity, the collapse has been even greater, as we’ve seen the temporary shutdown of many generating activities on top of the paralysis in consumption, leaving a large part of the management industry in Spain without activity.

Exceptional circumstances to which SIGAUS has responded by modifying its entire financing model for used oil management companies, to adapt it to the needs of the sector and thus ensure its viability, until the situation returns to normal. Accordingly, SIGAUS accepts that it is fundamental to finance a percentage of the operating costs which companies are now facing, in order to ensure a minimum servicing of operations management, and also advancing the financing and contributing to the improvement of its cash flow.

The main feature of the new model, which will be applicable from April to December 2020, is that SIGAUS will not finance management companies based on the volume of used oils managed in 2020, but rather the volume managed by them in 2019. Specifically, funding will be determined by multiplying the tons of used industrial oil managed in the last 9 months of 2019 by a fixed amount fee. In this way, managing companies are guaranteed a fixed monthly income based on their ‘pre-Covid’ activity, regardless of the drop in actual volume managed in 2020.

Also, for the purpose of injecting liquidity into the sector, SIGAUS will assume the financial endeavour of advancing monthly payments to managing companies from 60 to 30 days, from the date of accrual of the invoices corresponding to the quantities of used industrial oil actually collected. 

In all cases, the amounts have been calculated based on the fixed and variable costs extracted from the management cost study (carried out independently by the consulting firm PwC, before the Covid-19 crisis), to which the aforementioned 60% reduction scenario in the volume to be managed in the period April to December 2020 has been applied.

Ensuring universal service

Eduardo de Lecea, General Director of SIGAUS, points out: “We are facing an unprecedented drop in the consumption of industrial oils, of around 60% with respect to 2019 levels. Even with such economic impact on our revenue, we must continue to ensure the management of used oil, regardless of the volume that is generated and the distance to be covered. And that undoubtedly includes contributing to the sustainability of the management business world, without prejudice to these companies being able to obtain other types of aid enabled by the Public Administrations. The lubricant sector assumes, as always, this responsibility with the management of used industrial oil and with the environment. We cannot jeopardise collection in rural Spain, in de-populated areas or those with high environmental vulnerability”.

The General director of SIGAUS added that “it is, ultimately, an exceptional situation that requires exceptional measures, which strengthen our position as guarantors that this hazardous waste will not affect the environment. And furthermore, we are doing so without passing on the extra cost to consumers, and thus without penalising a demand that has already been extremely weakened by this health crisis.”