The expectation is that the targets could be substantially higher than those of 2003, which the government decided to keep at the same level as 2002.
The undemanding targets of 2003 has led to a slump in packaging waste recovery note (PRN) prices this year, from the heady heights of 30 a tonne in November 2002. This was not helped by the “inappropriate” issuing of PRNs thought to have occurred in the plastics and wood sectors and possibly other sectors, too.
There is concern that the collapse in the amount of investment being brought into the system by PRNs may make it more difficult for the UK to reach European targets. One reprocessor reported that that the amount of investment available from PRNs was down ten-fold on last year.
All eyes are now on what targets the government will announce for next year. Responding to the government's consultation paper, most stakeholders demanded targets to be announced early and long-term.
A spokesman for the Department for Environment, Food and Rural Affairs told letsrecycle.com that the targets for 2004 to 2008 would be announced “later this week”.
Prices
PRN prices continued low this month on the open market, with notes trading for under 3 a tonne for some materials. It is thought that many obligated organisations have already obtained their requirement for the year, leaving little demand despite the “ridiculous” prices.
Paper, plastics, wood and steel PRNs have been changing hands for as little as 1.50 a tonne on the spot market as “fill-in tonnage” for larger buyers. Reprocessors are now trying to sell surplus tonnages for any value they can get, but mostly, the feeling is that prices cannot get any lower than this.
Slightly higher prices are being seen in glass and aluminium as buyers seek to secure relationships with reprocessors as they look ahead to next year's expected target increases, with glass and aluminium PRNs going for around 7 to 10 a tonne.
December
An announcement on next year's targets this week could lift December PRN prices as traders take advantage of the permitted carry-over of December PRNs into a subsequent year. But next year, even taking into account higher targets, traders do not expect “stupidly” high rises in PRN prices, some suggestions are that likely levels on the open market will be around 15 to 20 a tonne with a “slight oversupply”.
There is a particular question over how the UK will reach glass targets – with quite a jump from the 34% UK rate in 2002 to the European target of 60% by 2008. Prices for glass PRNs are therefore higher than other materials, at around 7 to 10.
While glass may be a high target to reach, traders are warning against talking up prices, as many believe there will still be sufficient glass PRNs about.
Meanwhile, the Environment Exchange, which provides a marketplace for buying and selling PRNs, has announced a further 40% stake up for sale following the successful acquisition of a similar stake by Valpak earlier in the year. The online PRN market's financial advisors, Impax Capital Corporation Ltd, has already been talking to “a number of parties who expressed an interest when the first 40% stake went up for sale”, and is expected to finalise a new deal by January 2004.
Contracts
Away from the open market, prices for PRNs in some longer-term contract agreements with certain compliance schemes can be higher than “spot” or short-term arrangements. This factor could explain why members of some schemes are being charged up to 10 a tonne higher for PRNs in the fourth quarter than prices on the open market – as much as 23 a tonne for aluminium PRNs and 13 a tonne for paper PRNs.
The argument on the part of such schemes is that these contract prices reflect the larger quantities of PRNs the schemes have to secure – the spot market represents a much smaller proportion of the total number of PRNs in the marketplace than those in contract agreements. But, with holes in company budgets where prices of PRNs are 2 where they used to be 20, there are concerns in the sector that jobs could be affected.
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