Buyers in weak position as glass PRN prices soar

Buyers have been left in a weak position as the price paid for glass PRNs has shot up to a record high, raising concerns that businesses will struggle to comply with their 2012 packaging recycling targets.

The glass PRN prices started to increase after the second quarter figures for 2012 revealed a sharp drop inthe amount of the material beingrecycled(see letsrecycle.com story).

Since then, prices have continued to climb to around 60 a tonne at present and it is feared that continuing poor figures this year could have an impact on 2013 due to a lack of PRNs being carried over.

The situation is of particular concern to producer compliance scheme with fixed price contracts, who have agreed a set price with the customers for PRNs before the prices shot up. As a result, it is understood that some are seeking to renegotiate these deals.

The third quarter reprocessor and exporter figures are due at the end of the October 2012 and are hoped to give a better indication of whether businesses will meet their obligation for the year.

Factors

Duncan Simpson, director of sales and marketing at Valpak, the UKs largest packaging producer compliance scheme, said the shortage in glass recycling evidence, and consequent price rise, was due to a number of factors.

He said this included the collection of more glass at the kerbside and removal of glass bring banks. He said this was reducing material quality andmeantthatinvestment was requiredto clean up and recycle the material.

He said: If this price spike is due to a rise in mixed glass collections and greater contamination then we would now expect glass reprocessors to invest this extra flow of PRN revenue into their processes for cleaning and screening glass cullet and into price support for the sector. It also emphasises the need for good MRF quality standards and continued investment into collection and processing techniques especially as the 2013 targets limit the volumes that can be taken by the aggregates industry.

Mr Simpson added that producer compliance schemes had a legal requirement to complyand that Valpak wasusing all of our contracts in the sector and procurement relationships to minimise the impact on customers as much as we can.

Closed bids

Luis Picchio, a trader at environmental compliance and recycling company Clarity Environmental, said that moves by some reprocessors to carry out closed bids for PRNs was making the situation for buyers more difficult.

He said: The new trend amongst a number of reprocessors and exporters for closed bidding sales has left some buyers in a weak position unless they can collaborate to make a substantial enough bid.

This tactic is understood to have been taken by one large glass reprocessor which was looking to sell 25,000 PRNs in a sealed bid auction last week. It is understood that the PRNs were sold for more than 75 each.

Prices

Some in the industry believe the increase in price is balancing out the price the market has been seeing over the previous two years, when the price of PRNs averaged 10 in 2011 and 16in 2010.

But, there are fears that even if businesses do comply this year there will be problems for next, when glass targets are set to be split according to whether the glass is sent to remelt or aggregates.

Ian Andrews, trader at PRN trading platform the Environment Exchange, said: Some believe the third quarter supply figures will make for comfortable reading and we should see a massive surge towards better volume. But I dont believe that. At the end of this year it appears we are going to have no carry over tonnage. This could lead to more problems for the year ahead.

Mr Andrews urged the Agency to plan ahead and look at the strategic action it could take.

British Glass

Meanwhile British Glass, the trade association for the glass industry in the UK, also suggested there was more the Agency could do.

Rebecca Cocking, head of container affairs at British Glass, told letsrecycle.com: The Agency accredits all of the reprocessors and for glass the number of companies does not change dramatically year on year. If I were them, I would do some analysis work and look at company against company and just see if there is anything obvious in the figures.

Agency

In response to the situation, the Environment Agencyhassaidit will process applications for reprocessors to issue PRNs as quickly as possibleand helpensure producers and schemes comply.

Chris Grove, Environment Agency environment and business advisor said: Reprocessors can still seek accreditation for the 2012 compliance period. The regulations allow an application assessment period of up to 12 weeks, but we will always work to turnaround applications around as quickly as possible.

He added: We have no powers to influence the volumes of waste recovered or the price of the PRN evidence issued but it is our job to ensure that producers and schemes meet their obligations.