While final reprocessor and exporter data for 2014 is due to be published in March, it is widely believed that targets for last year were comfortably met, with a large surplus of PRNs carried over into 2015, providing some cushioning for this year.
This is expected to help meet targets which rise in 2015. Most notably the plastics target rises by five percentage points for the third year running to 47%, while the target for aluminium goes up three percentage points to 49% and the targets for glass and steel rise one percentage point to 76% and 74% respectively.
Chris Taylor, trader at compliance and recycling company Clarity Environmental, said: “It looks like a lot of plastic, glass and steel will be brought forward from last year which may mean the targets for 2014 are met quite comfortably. If that is the case it is looking quite comfortable for this year due to the carry over and the fact that the targets are not going up too much. I don’t think we will see ridiculously high prices”
However, problems in the commodities markets – and plastics in particular where the depressed price of oil is reducing demand for recycled polymers – are ringing alarm bells for some, who claim that this coupled with the rise in the plastics target could cause problems in the market. Some have even suggested that this could potentially see prices for plastics PRNs pushed up to the £60-70 a tonne mark as seen in glass in early 2014.
“I think the big issue for the year has to be plastics”, said one industry commentator. “The price of oil and impact that is having on the market plus the increase in targets. Potentially we could see prices going up to glass levels of £60-70 a tonne. That would have a big impact on producers.”
Oil Price
Ian Andrews, senior market trader at the Environment Exchange, agreed that the falling oil price is ‘critical’ for the plastics sector.
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He said: “We are getting to the point that they [manufacturers] are incentivised to use virgin rather than recycled material. There was a weakening in the plastics PRN price at the end of 2014. Unless sellers are given support by buyers it is not incentivising activity in the market and could even discourage it.”
He added: “Plastics will see volatility this year. I think the carry over will be large and people will be fooled into thinking everything is fine and it will mask problems on the ground, which could see prices increasing through the year.”
Plastics
Jessica Baker, managing director at Chase Plastics, confirmed that UK plastics reprocessors were suffering and that this could impact the market in early 2015, but suggested this could level off later in the year and that a drop in reprocessor tonnages would probably be balanced out by material being sent instead for export. Chase Plastics is one of a number of companies pushing for changes to the PRN system to support more UK reprocessing.
She said: “The UK sector in quarter 1 will be under huge pressure from the oil price. It might look a bit tight. I would think we will get up to £20-30 a tonne mark. But I think for the rest of the year we will do some catching up. And if we stop buying the material someone else will export it and will still produce a PERN”.
Valpak
A warning over economic conditions and reduced demand for recycled materials also came from compliance scheme Valpak, which noted a drop in demand across a range of materials, including plastics and steel.
However the company pointed out that the prices paid for commodities over the last 3 years were “some of the most stable for some time” and that the falls were nowhere near as bad as those seen in 2008/9.
Valpak added that industry had coped well with previous rises in the plastics recycling target and suggested that the reduction in the oil price would also benefit recyclers in terms of fuel costs.
‘Stable’
Duncan Simpson, sales and marketing director at Valpak, said: “Valpak believe that with the changes made to the glass targets in 2014 following publication of the Glassflow report and subsequent Government change to 2015 to 2017 targets then the 2015 compliance period should be relatively stable.
“We will pay close attention to the steel and plastic markets but expect that the performance in previous years should help deliver a normal year for price in the market overall. The supply side could be tough but it may well be balanced by lower than expected obligations in 2015 due the tough sales environment which stayed in place throughout much of 2014.”
He added: “Things will become clearer when we have final 2014 compliance figures, an idea of carry over into 2015. April will obviously also see the UKs 2015 obligation which many are preparing to submit over the next few weeks and months.”
Regulation
A number of regulatory factors are also expected to impact on the PRN market in 2015. Alongside a revision down of the glass targets, energy from waste plants may be required to comply with R1 energy efficient status to be able to issue recovery PRNs – with only three such plants currently in operation (see letrecycle.com story). However, the impact of this on the market is expected to be limited due to the excess of PRNs available.
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With regards to metals, there are also changes to the metals protocols which determine what proportion of recycled metal scrap can be counted as packaging for the purpose of meeting the targets. The changes include the introduction of an Incinerator Bottom Ash (IBA) protocol, which means that 50% of the aluminium recovered from IBA which is recycled will count as packaging.
Commenting on the changes, T2E’s Mr Andrews said: “There is good news and bad for alumimium. The protocol which allowed for 9% of aluminium scrap to be counted as packaging has been removed. That accounted for around 12,000t/year out of a total of 72,000 tonnes which is significant. But we also have more tonnage coming in from the IBA Quality Protocol. So what they take away with one hand they give with the other.”
A fresh steer on regulatory issues is also expected when the new Advisory Committee on Packaging, headed by new chair Phil Conran, meets for the first time later this month. Members for the ACP are currently being recruited and once up and running, the body will look at issues including the review of the PRN system to ensure it is sustainable for the long term.
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