Glass PRN price rises in focus

The market for glass PRNs has taken an unexpected rise in price from the flat market of the past 18 months. When the coalition government came to power they announced a comprehensive review of waste strategy and policy and set flat targets for two years while the process took place.

As a result the prices paid for glass PRNs has been steadily falling from average prices of 20-25 per tonne in the years running up to the review to averages around 10 per tonne. These price falls had been predicted by the compliance sector. At that time the industry warned in some circumstances it could stop investment into glass reprocessing infrastructure and a possible fall in prices paid for collected bottles and jars for recycling, as can be seen from the table below:

The price paid for glass PRNs however has started to rise sharply in 2012 with prices being paid for glass PRNs reaching as high as 60 per tonne. This has come as a surprise to many in the sector as on the face of it the market should be flat. The reason for the increase in price is because demand for PRNs has significantly outstripped supply for two consecutive quarters.

In quarter 1, the supply of PRNs plus the carry in met the quarterly requirement for obligation. Fluctuations in the glass PRN supply are not unknown and the market did not immediately react. However, the large drop in Q2 down to approximately 350kT means that the UK is currently circa. 85kT short and will require the two highest quarters on record to meet the UKs 2012 obligation.

It is possible that there are anomalies in the Q1 and Q2 supply figures and backdated increased supply may subsequently appear. However, current indications are that this is not the case and therefore an increased PRN price is required to fund activities that would otherwise be uneconomic which in turn increases the PRN supply.

Collections

There have been a number of the reasons put forwards causing the decrease of glass recycling evidence. It is believed that there has been a rise in the amounts of glass being collected on kerbside. This material is delivered to MRFs mixed and has been separated for recycling but contains higher volumes of contamination leading to higher costs of screening and separation and greater losses throughout the process. Handling output material at low PRN prices can be uneconomic.

There is also a belief that this rise in kerbside has meant a reduction in the total amount of bring facilities in the UK. This is said to compound the problem by the fact that bring sites are normally collected colour separated and therefore require less treatment prior to recycling and have less losses through the process.

It is also suspected that the loss of tonnage previously provided by two major reprocessors, Moss and Nationwide, has compounded the problem further. It should be underlined that historically the glass PRN has normally run at a level of 20-25 per tonne in a market which is driven by steadily rising targets and that obligated businesses and schemes had become used to lower costs as a result in the flat targets set by DEFRA in 2011 and 2012. This means that the rise in costs will be felt more acutely this year than most.