Hunter councils say the impending closure of the Sydney plant now processing the region's yellow-bin waste will not affect their recycling operations.
The Sydney Morning Herald reported on Thursday that Polytrade's Rydalmere plant would close at the end of March.
The plant has been accepting recycling from Newcastle and the four councils, Lake Macquarie, Maitland, Cessnock and Singleton, that make up the Hunter Resource Recovery consortium after the region's processing plant at Gateshead shut without warning two weeks ago.
The Rydalmere closure has left Fairfield, Inner West, Willoughby and Lithgow councils scrambling to find another plant to take their yellow-bin recyclables.
City of Newcastle councillors voted this week to extricate themselves from the chaos by signing a new recycling processing contract with iQ Renew on the Central Coast.
Council chief executive officer Jeremy Bath said the city's kerbside collection contractor, Solo, would start transporting recyclables to iQ Renew from Monday.
The council will enter into a one-year contract with iQ Renew while it works on a long-term recycling strategy which could include establishing a MRF at its expansive Summerhill tip site.
The new contract and a variation in the council's deal with Solo will add about $2 million to Newcastle's annual recycling costs, which equates to about $20 per household.
Willoughby Council started using iQ Renew last week.
The Newcastle Herald reported on Thursday that Hunter Resource Recovery was happy to continue sending its recyclables via Solo to Polytrade's Rydalmere plant but hoped to work with Solo and Polytrade on reopening the Gateshead facility.
HRR chief executive officer Roger Lewis said on Thursday morning that Polytrade had other sorting plants, known in the industry as materials recovery facilities (MRFs), in Sydney that could take the Lower Hunter councils' recyclables until Gateshead reopened.
He said he was not concerned about the Rydalmere closure and HRR was "looking to fast-track the Gateshead refit".
In a complex business arrangement, Solo subcontracted the sorting and distribution of HRR and Newcastle recyclables to Polytrade, which in turn subcontracted the work to a company called Materials Recovery Management, which is owned by iQ Renew.
It is understood Materials Recovery Management, which owns the processing equipment at Gateshead, has terminated its contract with Polytrade over the Gateshead "gate" fee, which is the amount per tonne MRF operators charge for trucks to enter their plants.
The contract termination has effectively shuttered the Gateshead MRF.
In a separate dispute, Materials Recovery Management is taking Polytrade to the Supreme Court in a matter listed for a directions hearing on February 21.
Gate fees have become a crucial component in the recycling chain as Australian MRF operators struggle to find a viable market for their products.
The industry has been in turmoil since 2018, when China banned the importation of other countries' waste, wiping out half the global market for recyclable materials.