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Posts tagged PRN Year Overview
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 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

Packaging Recovery Notes Weekly Market Report – 26th January 2018

2017 PRN Market

Mixed news from the 2017 market this previous week with prices for the troublesome Plastic starting to soften considerably as we head towards the end of the month. Prices dipped into high teens as a excessive supply was offered. In Aluminium, a large buying clip was satisfied which many believe is the end of the volume buying for 2017. Small aluminium documents continue to attract a premium. Buying continues to drift into the wood market with some later 2017 buyers required to pay a premium for transitional tonnage. All other materials appear in good health with the only other point of note being the Steel price falling and attracting some final general recycling requirements.

2018 PRN Market

The majority of activity in the 2018 market has centred on Plastic. Prices rose slightly as cautious buyers secured tonnage early. In the coming week we will get a better idea of prices as the market settles and focuses on 2018 opportunities. Glass is tipped to have a lower carry in this year with some sellers expecting an improvement on 2017 prices. The Aluminium market will be one to watch given that many of the predictions for a healthy surplus in 2017 do not appear to have come to pass.