To see this level of increase in a shrinking market is tremendous
Angus Macpherson, t2e
The Edinburgh-based company announced on Friday (November 19) that it had achieved the ‘milestone' for the second year running (see letsrecycle.com story) – but this time seven weeks earlier, representing a like for like trading increase of 7% on 2009. The 2010 compliance year runs until the end of January 2011.
The performance was attributed to a big rise in forward trading, which allows users to agree to buy a set number of PRNs up to a year in advance – for which t2e offers a 40% discount. This accounted for 70% of all trading on t2e this year, up from 40% in 2009.
Environment Exchange (t2e) managing director Angus Macpherson explained that forward trading allowed customers to plan and budget in advance which made it popular. He added that users of t2e also liked the price transparency it offered and the fact that it took away a lot of the administrative burden.
Mr Macpherson said: “To see this level of increase in a shrinking market (the obligation dropped 2% between 2009 and 2010) is tremendous. Thank you to all our participants who have remained loyal to us in these times of low prices.”
Senior market operator at t2e, Ian Andrews, added: “Seventy per cent of all trading in this compliance year to date has gone through the forward markets which is almost double last year.With static targets many are suggesting we are entering uncharted territory. In uncertain times the security of t2e's forward contracts will continue to appeal as will the fee discount which will be maintained throughout 2011”.
2011
Looking ahead to 2011, Mr Macpherson said that the decision by the government to keep the packaging recycling targets broadly flat (see letsrecycle.com story) had already “taken the heat out of the market” compared to this time last year.
He explained that, earlier in 2010, many people had withdrawn from PRN trading due to uncertainty over what next year's targets would look like and now they were relatively flat enthusiasm had not returned.
He said: “There is a certain amount of complacency. They think there will be plenty of PRNs to go around.”
Consequently, Mr Macpherson said that from a seller's perspective the 2011 market “did not look terribly optimistic” with regards to the price of PRNs.
However, if there was a PRN surplus, he said this would indicate that markets for recovered materials were doing well, which would be good news for reprocessors and exporters. At the same time costs for obligated businesses would be low, which they will welcome.
Down the line, Mr Macpherson said that those accredited to produce PRNs were also likely to pull out as it was voluntary and only worth their while if the prices stood up.
He said: “The trouble with those who pull out is that it is their competitors who benefit.”
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