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MRW Article - Q2 Reprocessing and Recycling Figures

It was good to see the team at NPWD catch us all off guard and release the report one day early being made available on the Sunday morning. Those who managed to access early will have no doubt dropped their copy of the Sunday times as their eyes cast down the report. Too much relief the news for Q2 was one of great improvement with evidence note generation rising as fast as the temperature. In Wood, supply was up by 41%, reporting 118,000 tonnes for the quarter putting the market back on target to meet its material specific obligation. With little to no excess Wood being generated it was heartening to see Paper supply grow by 8.5% against the previous period. This increase when taken along Q1 supply and this year’s carry in tonnage puts the Paper market in a position to create an excess of around 750,000 tonnes this year all of which will be required to meet overall recycling target. In Steel, further growth of 6.9%, will result in over 100,000 tonnes of excess supply if the trend is maintained. Another market which appears to be heading towards the 100,000 tonnes excess supply position is Plastic which reported a 13% increase this quarter. Plastic, the most talked about market, has seen strong returns over the last 18 months although reviewing the price trend you wouldn’t think that is the case. Some sellers have marveled at the level of reported tonnage being exported with many questioning the validity of the numbers. So it would appear Plastic will continue to be dominated by conflicting views. Which to believe? Audited supply figures or hearsay and negative media articles, I know which side I will be on.

Glass Remelt volumes continue to outstrip those of their poor relative Glass Other which is just as well given the Glass Other pot of supply is woefully behind. At the mid-point of the year Glass Other has only produced 27% of supply to meet its obligation. Glass remelt volumes remain in excess with 67% of demand already met. At current rates, and given the expected boost of volume from the recent spell of good weather, there is every chance that Glass Remelt will provide enough excess to meet both the undersupply in Glass Other and General Recycling obligations.

The last quarter has been dominated by concerns of undersupply across all materials which in turn has placed upward pressure on prices. The reason why this has occurred centers of the flexible pot of demand know as General Recycling obligations. Buyers who have to secure General Recycling notes have the option to purchase any of the material evidence notes in the market. In the past these obligations have been filled by Paper and Wood surpluses which are generally noted as being the cheapest of the material prns available. The increase in the Wood specific obligation has resulted in a loss of around 200,000 tonnes of the General Recycling note supply and buyers have been eager to secure tonnage in other low value markets. This is why we have seen upward price pressure in both Paper and Steel notes and more recently Glass notes. The latest set of supply figures shows that all markets remain in good health with excess supply now expected to be generated in Steel, Glass and Paper to meet the downturn in Wood. I have omitted Plastic for the simple reason that I do not believe the note value will drop to a low enough level to provide competition with other materials.

These figures make very pleasing reading as they provide further evidence that the design of the system works as it should. When note values increase we see that replicated in increased supply. What is concerning is the reaction of the market to hearsay and talk of issues going forward even when published information shows supply in good health. People often discuss the carry in tonnage and dismiss the volumes concerned due to the fact that they generally get carried into the next year. Carry in tonnage is there to act as a buffer for years when issues surrounding supply come to the fore. This year we have seen Plastic Carry In reported at 74,000 tonnes. When combined with the Q1 supply figure at the end of Q1 the market had excess of 66,000 tonnes but yet the Plastic price maintained its price spread of £60 - £70. The latest set of figures show that at the midpoint the market had excess of 90,000 tonnes of Plastic, what price as Plastic PRN in Q3? Who knows but if buyers take anything from this latest set of figures then surely it has to be, concentrate on the published information when approaching pricing decisions and be aware that everything you hear may not be as it seems. 

Ian Andrews

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