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Posts tagged Q2 Reprocessing & Export Figures
PRN Market Report - Week Ending Friday 3rd August 2018

PRN Market Overview

This week, limited trading was recorded as the standoff between buyers and sellers prices aspirations softened slightly. In Glass, a small downward price shift resulted in some reasonable volume trading. Plastic prices remained volatile, moving up before settling back at the weeks opening price.  Competition for Wood tonnage resulted in prices increasing during the week as buyers continue to target volume.

Trading activity returned to the market but reported volumes remain some way behind the corresponding period last year. Confusion continues to dominate the Plastic market with reported supply at odds with the general market outlook. No fewer than six articles were published last week highlighting the export issues in the far east markets. Surprisingly, two weeks after the Q2 supply figures were released we have yet to see any positive commentary from the main industry press. It may be that they, like most of us, are confused as to what message to report.  Buyers are slowly drifting back to their desks but there are reports that some are under instruction to hold off purchasing until prices realign in light of the good Q2 supply performance.  It would appear that we are heading toward a period of standoff between buyers and sellers.  With July monthly figures due to be released this week it is hoped the standoff will break. Buyers are willing  to secure tonnage but remain confused that the latest supply picture isn’t resulting in downward pressure on prices even by the smallest margin.

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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.

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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.

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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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