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PRN Market Report – Wk. End : Friday 5th October 2018

PRN Market Overview

Renewed interest from general recycling buyers resulted in Glass prices increasing during the week. Buyers initially targeted Aggregate supply however when supply became hard to source many turned their attention to the Remelt market which resulted in prices increasing in both markets. An easing of Wood supply was evident with volume tonnage being offered to buyers albeit at higher than current market prices.

We are due to see Septembers supply figures reported next week and this coupled with the Q3 supply figures (22nd)  should provide some insight into the challenges ahead before the end of the compliance year. All prices, with the exception of EFW notes, have been at record price levels this year so one would expect to see supply in good health. Reflecting on the last set of figures released for Q2, we had seen a record return for Plastic yet over the last quarter prices have continued to rise. Some commentators have said that this has been down to the domino effect of Far East countries implementing more stringent quality protocols taking the lead from China. There has been some dispute regarding the actual figures with HMRC export numbers not tallying with reported prn supply for the year. Regardless of the ongoing debate regarding the current figures it is expected Plastic will again meet its target.

PRN Market Report – Wk. End : Friday 28th September 2018

PRN Market Overview

This week we saw the Steel note price fall for the first time any many months. It would appear that it is positioning itself at a level which will result in buyers targeting it for general recycling obligations. All other prices remained within their previously reported spreads.

The debate on Plastic waste continues to dominate media headlines with a groundswell of activity now focusing on new technologies to recover and reuse the material. One compliance scheme, Ecosurety,  has taken the lead and committed to securing all prns generated from Recycling Technologies new plant in Scotland. Recycling Technologies have developed a process in which the Plastic waste can be refined back into an oil product for a variety of uses. It is hoped that this will be the start of further developments in the Plastic waste sector but it will take considerably support from all stakeholders to ensure these new technologies succeed. Previous opportunities to develop new methods of dealing with the material became unstuck when the virgin oil price dropped and made the new products overpriced.

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PRN Market Report – Wk. End : Friday 21st September 2018

PRN Market Overview

Glass Aggregate and Paper prices increased this week as buyers continuing to target the lowest value material prns for general recycling obligations. The availability of Wood recovery notes eased with sellers offering volume tonnage to the market. Wood prices continued to maintain their spread with concerns still dominating this market.

Discussion surrounding the redesign on the PRN system continued this week with news on a new  group being set up to discuss the implications. The Packaging Scheme Forum held their first meeting to discuss the impending revision of the Packaging Waste regulations. The Forum has been established by 45 of the 50 producer compliance schemes and aims to inform and provide guidance to regulators regarding the existing system. The forum will also look closely at the upcoming consultation on revising the system and provide there in depth knowledge in meeting the renewed challenges ahead.

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PRN Market Report – Wk. End : Friday 14th September 2018

Market Overview

Unsurprisingly trading activity fell this week with many stakeholders heading to the RWM in Birmingham during the week. Much of the discussions taking place at the show centered around the current PRN system and what the future holds. It would appear that after many years of trying to fix a system that wasn’t broken they have now decided change is afoot.

My thoughts are that the system has continued to deliver on the principals on which it was founded, that being, providing financial support at times when recycling activity is weak and vice versa. Over the last number of years the supply information has not reflected the price position of some materials, namely Plastic, and this will no doubt have added to stakeholders concerns regarding the validity of the current system. While I feel the time is right to redesign the system it would be foolhardy to start a fresh or copy other producer responsibility regimes which have failed to work. More focus needs to be placed on developing the UK’s infrastructure by incentivising domestic recycling. In addition I feel that those businesses who development more environmentally packaging should be provided with some form of credit for the good work they undertake.

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PRN Market Report – Wk. End : Friday 7th September 2018

PRN Market Overview

The Aluminium market was the only one to record increased values this week with prices firming up to £40.00 per tonne. All other markets maintained their previously reported price levels with reasonable volume trading across all materials. Concerns were raised regarding Plastic supply when the market was informed of a major exporter being suspended from issuing evidence notes however this suspension has now been lifted.

August’s monthly supply report highlighted a downturn in Paper and Plastic supply when compared against the corresponding period last year. If viewed in isolation it could raise concerns however, as has been the trend this year, the middle month of the quarter has consistently been the weakest reported. With a strong figure reported for July (104k) it is expected a good September return will keep the market on track for the year. As to how the price will react to this news it is anyone’s guess given how prices have reacted to positive news over the last 18 months.

This week will see the great and good of the industry head to the NEC (Birmingham) for the annual RWM show. As someone who spent many years attending as an exhibitor it was good to see it streamlined into a two day event as often the last day was quiet, partly due to a lack of attendee’s but also due to the recovery period required from the industry functions from the previous night. I will be in attendance on Wednesday and look forward to catching up with existing clients and hopefully attracting some new ones. I look forward to seeing you all there.

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PRN Market Report – Wk. End : Friday 31st August 2018

Market Overview

After two weeks away from the office I was surprised to see further increases in Plastic notes values. Prices increased up to £70.00 per tonne as stories emanated around further import restrictions to oversubscribed far east markets.  Paper, Steel and Glass prices reported small increases as buyers sought out best value for their general recycling requirements, tightening supply in each material. Wood prices have stabilised, albeit at record price levels, and Aluminium volumes reported a small lift due to increased demand.

Prices in Plastic rose as exporters reported concerns about the viability of new end markets to take tonnage, which would have previously been destined for the Chinese market. As volumes destined for these markets have grown, they have become backed up with material leading to internal logistical problems. This, coupled with newly introduced export restrictions in these end markets, has increased concerns surrounding the viability of said markets going forward; this has resulted in the latest price increases.

The Wood evidence note price has remained stable with reports that at current price levels it is providing strong competition for material previously destined for the bio mass market. A review of the latest published monthly return figures highlights that the average monthly return in Q2 has growth of 10k on the previous quarter. This provides the strongest indication yet that the increased note values are having the desired effect of increasing supply. At current levels the market will satisfy this year’s requirement, although with little carry out and increased targets due to result in demand going up by a further 70k next year, further price increases cannot be ruled out. 

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PRN Market Report - Week Ending Friday 27th July 2018

Market Report – Wk. End : Friday 27th July 2018

A week on from the Q2 supply report which showed great improvements across all materials and we have seen very little effect on market prices. There may be numerous reasons as to why this has occurred. Traditionally demand softens at this time of the year as most traders head for the beaches and this year was no different although many had been watching for news on supply. When it was announced, reporting a more positive position many will have turned off their phones and returned to the beach. During the week, as has become the norm, we were greeted with news of potential export problems stemming from new end markets and this resulted in a softening Plastic price rebounding. All other material note values held their previously reported price spread in what could be best described as the slowest trading week of the year.   

While weak trading activity has contributed to the lack of price movement this week, the analysis of the Q2 supply report will have played its part as many waited for evidence of how prices would react. Differing opinions created by the inclusion of this year’s “Carry In”  tonnage being used in 2018 or 2019 saw predictions of relief or concern. The “Carry In” tonnage is the buffer supply provided by last year’s activity, to be used in times of short supply. It has become commonplace to discount this tonnage as it traditionally gets pushed forward into the following year. I believe that this should be included within the supply analysis for the purpose for which it was designed. The table below shows the “Carry In” included,  and projections on required tonnage for Q3 & Q4. Within what looks like a relatively easy task there will be some surplus created which will be carried into 2019. This will be reported at the end of the compliance year to allow it to be factored into next year’s analysis.  The “Carry In”  information we have to hand this year should be utilised to address the concerns we have this year.

PRN Market Report – Wk. End : Friday 20th July 2018

PRN Market Overview

Trading activity slowed this week as buyers, buoyed by good volumes reported in the June monthly report, decided to hold off committing to current market prices until after the published Q2 supply figures were released. Paper traded in small volumes with prices holding at the previously reported level of £15.50. All other materials reported little to no activity.

The Q2 supply figures released over the weekend reported a strong performance across all markets with the exception of Glass Aggregate supply. The Glass Remelt market is currently creating enough excess to cover the additional Glass Aggregate demand and at current rates may provide some tonnage to General Recycling pot of demand. Plastic supply increased by 30k on Q1 and prices are expected to soften given the news. In Wood, supply increased by 35k in the quarter confirming that this year’s prices are starting to have the desired effect of increasing supply. Both metal grades reported improvements on Q1 with Steel looking like it will create excess of 100k which will provide additional comfort to general recycling buyers. Paper volumes were up and continue to improve.

This latest set of supply figures report improvements across the board and certainly appear to favour buyers. With good excesses now being predicted in Steel, Glass and Paper it is hoped this will lift some pressure off the Wood market.

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.

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

CIWM Journal Article – Review of Q1 Reprocessing/Export figures 2018.

At the start of this week the Environment Agency released the first set of Packaging Recovery Note (PRN) supply figures for 2018. These provide the first indication of the projected supply and will highlight what progress has been made towards this year’s targets.  China, its material bans on paper and plastic and the impacts are foremost on everyone’s minds.

With the Plastic market seeing the most volatility over the last few years it was comforting to see quarterly volumes reported at close to target. The initial report reported Plastic supply at 322,000 Tonnes (or 322KT) but this was quickly revised down to 251KT once submission errors had been rectified. At this level it was 10KT down on the same period last year.   However, with several reprocessors still to sign off their quarterly return, it is hoped that once completed, the supply will be on target for the quarter. Demand this year is expected to be about 265KT but the carry in tonnage should alleviate any short-term supply concerns.  This is last year’s December supply that can be used in this year and allows for a bit of a buffer in supply. Given the strength of the carry in one would expect prices to settle. If this supply can be maintained for Q2 then one would expect prices to soften later in the year.

Paper reported a sizable drop in supply on the same period last year dropping from 966KT to 822KT. It is thought that the restrictions placed on the export of mixed papers to China are finally starting to take effect. Once again, a reasonably strong carry in figure should address the short term concerns. The market has already reported an increase in Paper prices due to Q1 supply being allocated to forward contracts which has left the market undersupplied. The rise is from £1 to £5 and possibly further increases in the Paper price can be expected as the dwindling supply receives more attention from general recycling buyers.

The Paper market is due to see increased General Recycling Note demand this year; General recycling obligations are allocated to producers with the option to purchase any of the material recovery notes in the market. In the past this has ensured over supplied markets have an option to generate income albeit always  at the cheapest material note value. The Wood market has always provided a healthy surplus for the General Recycling pot of demand but with Wood obligations set to increase this year by over 70% in real terms producers will be looking for Paper to make up the shortfall.

As mentioned in the previous paragraph, the Wood demand is set to increase by 70% to about 417KT due to the new target . The Q1 supply was down by 13KT on 2017 figures and it will require 80KT additional growth if we are to meet this year’s material specific demand. With opening prices increasing to their highest level during the quarter (£15) it is concerning that current prices haven’t facilitated any growth in supply. As the note value increases this is meant to incentivise sellers to produce more supply, the problem in the Wood market is that the raw material is already competing with a heavily incentivized Biomass market and unfortunately losing the battle. The price will have to increase further if we are to close the 80KT supply gap for Wood.

Collectively, both Glass markets (Remelt & Aggregate) have managed to produce enough supply but it should be noted that this market is finely balanced. Aggregate supply continues to fall with Remelt only just covering the shortfall. Price for both grades should remain stable going forward but are expected to align at about £13 as the year progresses.

Aluminium has reported some growth this quarter, however due to target increases the supply only remains only on track with demand. A reduction in carry in tonnage has increased concerns and it is expected prices will hold at current levels (£15).  It is suspected that there should be a plentiful supply as last year was somewhat anomalous with at least one reprocessor hanging on to tonnage and not selling it, nor allowing it to be carried into 2018.

Steel, although performing well, is slightly behind last year’s supply. It had been hoped that this market would provide surplus tonnage to meet general recycling demand but at this stage this material cannot be relied upon. With prices opening at the low end of the pricing scale (£5), little incentive has been provided to increase supply last quarter.

The EFW market is well supplied and is expected to maintain current price levels (<£1).

Overall the figures were in line with expectations. With the exception of Paper, most grades reported similar levels of supply to last year but with increased targets, along with export restrictions and dwindling general recycling supply these latest figures show there is still some work ahead. Those markets which have already recorded higher than expected prices may see further increases in value if the Q2 report (23rd July 2018) fails to report a surplus.

Ian Andrews

CIWM Article - 2017 Review - One Door Closes as another Opens.

Now that the 2017 packaging compliance year has drawn to a close we look back at the issues surrounding last year’s compliance and look forward to what 2018 has in store.

The 2017 compliance year opened with packaging recovery note (PRN) prices trading at similar levels to 2016. Plastic was the highest value note at the start of the year and would continue to hold stakeholders attention throughout the year. Early trading was £25 per tonne however when media articles started to circulate regarding more stringent import controls on material destined for the Chinese market, prices started to increase. Concerns continued to dominate discussions during Q2 with news articles being printed every week highlighting them.

The PRN system was designed to increase price during a shortage to encourage more reprocessing or investment in capacity by having a more expensive note.  In other words, if there is a shortage then the price goes up and vice versa.  Historically this market mechanism has worked.  

Analysis of the reported monthly supply figures allowed stakeholders to get an early insight into the potential scale of the problems ahead.  During 2017, against the background of strong supply the evidence note price continued to increase to three times the starting price. This de-coupling of supply and price was initially challenging to understand.

As the year progressed it became clear that the Chinese authorities were preparing to continue implementing more stringent import controls with the introduction of the new National Sword protocol aiming to not only restrict lower grade plastic material but also target mixed paper grades. Confusingly, this news did not have the same effect on the Paper PRN price as seen in Plastic.

The confirmation of record breaking target increases (in real terms by around 70%) for Wood from 2018 onwards coupled with a downturn in packaging grade material going to recycling plants resulted in a tightening of supply towards the end of the year. This resulted in prices increasing from £2 to a high of £10 per tonne.

A dramatic increase of more than a factor of 10 in the Aluminium note value in the final days of the compliance year once again left many scratching their heads as again supply had indicated a surplus supply throughout the year.  Suggestions of market making or manipulation have been heard in the industry.

Looking forward to 2018 there do appear to be many challenges ahead. Plastic once again dominates early year discussions but if the system is to work as it is designed to, one would expect a more stable year.  We have already seen higher note values assist in identifying and facilitating exports to new end markets in 2017. One can argue that at some stage those new markets will become oversupplied and exports could slow again in which case we may see an increase in prices later in the year.

In order to fully address our reliance on export markets we need to be investing more in domestic reprocessing plants.  There has been limited success and many failures previously.  This has been attributed, in part, to a lack of support from the PRN system.  The higher values previously assisted with the export of material as opposed to incentivising domestic reprocessing facilities. 

Given that quality standards are starting to increase in the end export markets focus, has shifted back to development of domestic facilities and the higher value PRN should go some way to assisting this process. Indeed the recent announcement by Beauparc Utilities is the most recent of at least four new facilities opened or being planned.

With the weight of media attention now firmly focused on Plastic pollution it is expected this story will continue to develop this year so watch this space!

Ian Andrews