City of Newcastle has refused a request from Solo Resource Recovery, the company that collects yellow recycling bins, for a $15 million contract variation.
The Newcastle Herald understands Solo asked for a $3 million annual variation in its five-year contract after recycling giant Polytrade increased the fees it charges Solo's trucks to drop off domestic recycling at its Gateshead sorting plant.
Polytrade told the industry early last year that the Gateshead plant was operating on a week-by-week basis after China slapped a ban on importing many recyclables.
Solo applied successfully to Hunter Resource Recovery, the waste consortium formed by Lake Macquarie, Maitland, Cessnock and Singleton councils, for a multimillion-dollar variation in its contract.
But City of Newcastle chief executive officer Jeremy Bath confirmed he had refused to budge.
"City of Newcastle received a variation to its recycling contract last month from Solo Waste which was ultimately rejected," he said.
"We will continue to work with Solo to understand how China's tough new import laws on recycling are impacting on their financial position."
Mr Bath briefed councillors on the situation during a confidential session at this month's council meeting.
The Newcastle Herald has been told Solo wanted the variation backdated to the start of the contract two years ago and has threatened to skip scheduled collections of yellow bins in Newcastle during the contract wrangling.
Solo managing director Robert Richards denied the company had threatened a boycott.
He said there was "no dispute" with the council and it was "business as usual".
The Newcastle Herald understands the council has its own trucks on standby to pick up yellow bins if needed.
Hunter Resource Recovery financial statements show its revenue increased from $7.7 million in 2018 to $13 million this year, suggesting the four member councils have drastically increased their contributions in the past 12 months.
Sources say Lake Macquarie, which is the source of more than half HRR's recycling waste, has increased its share the most.
The statements show the amount HRR paid "recycling contractors" grew $3.4 million, from $7.06 million to $10.44 million, in the corresponding 12 months.
Many councils are grappling with what to do with domestic cardboard, plastic and glass after the China ban left recycling companies with limited options for disposing of them.
In a letter to Solo last year, Polytrade executive Colin Tsang said his company needed a contract variation and new offsite storage facilities.
Some councils have built or are considering building their own materials recovery facilities (MRFs) to gain more control over the downstream handling of their recyclables.
More than 61,000 tonnes of recyclables are collected in the Hunter each year from 263,000 homes, but Australia has few secondary processing plants to convert the material into useful products.