An agreement between two of Western Australia's recycling processors has collapsed, putting thousands of tonnes of material at risk of being diverted to landfill.

Key points: Cleanaway is the kerbside waste collector for 20 WA councils

Cleanaway is the kerbside waste collector for 20 WA councils Fire destroyed the company's material handling facility in November

Fire destroyed the company's material handling facility in November Contract negotiations to get another processor to take the material have failed

Cleanaway is the kerbside waste collection contractor for 20 councils across WA, but fire destroyed the company's $25 million material handling facility in November 2019

Cleanaway had sought out other facilities in the metropolitan area to try to process as much recycling material as possible, including by entering an agreement with the South Metropolitan Regional Council (SMRC).

But that interim agreement ended on January 24, and SMRC executive manager of strategic projects Brendan Doherty said the two parties could not agree on a long-term contract.

"We entered into a short-term contractual arrangement with a view to during a period of time then sign a longer-term agreement," he said.

The fire sent fireballs and a plume of thick black smoke into the air. ( ABC News: James Carmody )

"We put forward our terms and conditions and we had a number of discussions with Cleanaway on them and their position was they weren't prepared to agree to those terms and conditions.

"We then advised them that after a period of three weeks we wouldn't be able to receive their material without a signed long-term agreement.

"[The disagreement] was about the headline terms of the agreement, which included money."

Councils can deliver direct to SMRC

The councils which had been sending recycling to the SMRC facility in Canning Vale — via Cleanaway — up until January 24 were the City of Swan, City of Bayswater, City of Mandurah, City of Subiaco, City of South Perth, Town of Vincent and Town of Victoria Park.

It is unclear what arrangements these councils have made for their recycling material, but Mr Doherty said some of the individual councils were now delivering their recycling directly to the SMRC facility.

"They can certainly approach us directly and some of those councils have," he said.

"Both Cleanaway customers, and other local authorities that may have been affected, we have continued to provide a service for some of those councils and we're in discussions with other councils to meet their requirements."

More than 130 firefighters using specialist equipment were sent to battle the blaze on Hynes Road. ( ABC News: James Carmody )

"Prior to us taking the material, we were doing about 500 tonnes per week.

"Then with the Cleanaway material we ramped up to a second shift with extended operating hours, so we were taking well in excess of what we were operating at previously."

The SMRC also hired 15 new staff to cope with the increased demand, sourced from those who were working at Cleanaway before the fire.

Some recycling material destined for landfill

In a statement, a Cleanaway spokesman said the company wanted to use all remaining recycling capacity in Perth.

"Cleanaway sought to establish an ongoing arrangement with the SMRC but to date the parties have been unable to agree a commercially viable ongoing agreement which is acceptable to both parties," the spokesman said.

Fire destroyed Cleanaway's South Guildford facility. ( ABC News: James Carmody )

"Design works for a replacement [facility] are already underway in an effort to ensure Cleanaway can return Perth's recyclables processing market capacity to pre-fire levels.

"In the interim, Cleanaway has an infrastructure plan to provide manual processing solutions, which are expected to become operational between February and May 2020."

But the spokesman said it was inevitable some material would end up in landfill.

"The loss of the MRF means that there is insufficient capacity within the Perth market for the remaining facilities to process all of the Perth's kerbside recyclables," he said.

"This inevitably means that an amount will be disposed of at landfill, as alternative options such as stockpiling are not viable due to the risk of fire."

Cleanaway expects to rebuild its South Guildford facility and have it up and running by the end of this year.