The City of Ballarat is putting its recycling contingency plan into place as the gates of its contractor SKM remain closed.
This means collections of kerbside recycling will now be sorted locally, with a view to selling it to local markets.
The council has so far avoided sending any recycling to landfill by stockpiling at space provided by "contractors and other parties".
Thousands of tonnes of recycling have been sent to landfill by other councils around the state.
Recycling collections in Ballarat have still been taking place, with residents urged to continue to sort items as normal.
There were hopes that another company would step in to invest in SKM's infrastructure and assets after the company's SKM Corporate entity was declared insolvent at Victoria's Supreme Court this month.
However, nothing has yet been confirmed, and with pressure growing on stockpiling capacity, The Courier understands the council has decided to enact its back-up plan.
The council also began to sort recycling materials when SKM temporarily closed its Geelong plant - which received recycling collected from the Ballarat area - in February this year.
SKM's business model had come under huge pressure after China stopped taking the majority of Australia's recycling exports at the start of 2018. T
he company, whose contract with the City of Ballarat runs until the end of this year, was responsible for handling more than half the state's recycling.
The council is expected to release more details on the sorting plan later on Tuesday.