CIWM Journal Article – Review of Q2 Reprocessing and Export Figures
If the first set of supply figures raised availability concerns, the second set published this week will provide some comfort. All materials reported a strong showing with only the Glass Other supply failing to meet its target. Glass Remelt volumes continue to provide a buffer to cover the Glass Other obligations and at current rates may yet add some excess supply to the General Recycling obligation.
Paper reported a 8.5% increase on Q1 supply and is starting to recover from the perceived short position from earlier in the year. Both Aluminium and Steel reported increases up 10% and 6.9%. In Wood it would appear the increased note value is having the desired effect with supply up 41% on Q1. Plastic continues to perform well reporting the highest quarterly return recorded at 285,000 tonnes although it is sobering to point out, as the National Audit Office report recently has, around 65% of this total is generated by the export side of the market. Below I look at each material individually.
Glass Remelt supply created a good surplus this quarter which helped to address the undersupply position of the Glass Other market. When demand and supply is combined, this market is on track to meet obligations and with the current heatwave expected to increase supply of material in the later part of the year there is every opportunity for it to record a surplus. Prices are expected to remain stable until the next published figures are released in October.
Paper reported an improvement of 70,000 tonnes on the previous period. At current levels Paper material specific demand will be met with the next quarters supply leaving the market with Q4 supply to satisfy General Recycling demand. The figures show that this quarter in excess of 1 million tonnes were issued compared to just 268,000 tonnes in Q1. As Q1 buyers circled the market in search of Paper many were disappointed with the responses of sellers who had limited tonnage for Spot transactions. This created an impression of significant tightness in supply when in actual fact the supply had been generated but was being used to satisfy lower value contracts agreed in the final two quarters of 2017. The additional demand from previously contracted buyers overheated the market and resulted in prices increasing when that demand could not be met. As prices started to increase General buyers looked to other markets to satisfy demand and this additional interest in these markets resulted in prices increasing in all lower value material prns. The fact that very little was issued in Q1 and an excess was issued in Q2 when compared against supply confirms that contracts had been agreed just not delivered.
A strong showing for Aluminium with supply increasing on Q1 by 10% and now on target. Concerns were raised earlier in the year when 6,000 tonnes of December tonnage failed to be carried across into 2018. This coupled with news of new import tariffs being imposed in the US drove concerned buyers into the market and saw prices increase in the early part of the year. The latest set of figures shows that we are back on track and it is expected that if the supply continues its current trend then prices will soften as the year progresses.
The Steel material specific obligation will be met with ease this year but the notes attractiveness for General Recycling buyers should result in continued interest in the excess supply it creates. The additional demand should result in values remaining stable for the next quarter with potential for a slight softening of note values.
Very positive news for Wood buyers with supply increasing by 41% this quarter. It is expected that prices will hold at their current levels for the immediate future as it provides a subside at a level which provides strong competition for the recovered material. On current projections this market will meet its obligation this year but will provide little surplus to be carried across into 2019 when next years target increase will result in a further jump of 70,000 tonnes.
The Plastic market has recorded its highest quarter volumes even against a backdrop of struggling export markets. It would appear at current price levels we are heading towards creating a surplus supply of in the region of 100,000 tonnes. The is some irony in the fact that 2/3rds of the supply generated comes from the export markets with the figures being released so soon after the published NAO report which was highly critical of this route for reprocessing. The UK market is heavily dependent on oversea markets to deal with our material due to lack domestic plants. In the short term, one would expect this trend to continue given that over the last number of years there have been numerous Plastic recovery businesses located in the UK which have run into financial difficulties. Our reliance on export markets cannot be understated but there are certainly things which could help increase confidence in these routes. With other materials protocol percentages are applied in order to cover such issues as contamination being claimed upon and this would appear to be the simplest answer to dealing with concerns raised in the report.
The EFW (Recovery) note reported a downturn in supply but is currently carrying a surplus of over 100.000 tonnes at the mid-point of the year. Evidence notes values are expected to remain at administrative levels going forward. Readers should be aware that this note can only be used for EFW obligations so regardless of surplus it will have no bearing on other note values.
The outlook for the year has been boosted by this latest set of figures. The lack of available Wood tonnage for General Recycling obligations will continue to focus buyers concerns but with Paper, Steel, Glass and Plastic now indicating good growth albeit at higher than expected price levels it is felt the situation has greatly improved from the supply position in Q1. With regard to the latest negative reports regarding the overall system, the evidence to hand shows that when evidence note values increase supply increases which is what the system is designed to do. There are valid criticisms surrounding the robustness of the data the market produces but it is up to those who produce the information to ensure it is reliable. The mid-year report card this year should state Great Improvement, Price Increases = Increased Supply, Progress still required, Focus on the information to hand and to those who provide the information, Make sure it is robust and creditable.