Packaging sector welcomes encouraging Q2 figures

Provisional packaging waste recovery data published for the second quarter of 2013 has been described as encouraging by sections of the packaging compliance sector, following a difficult first quarter.

The data, for April-June 2013, published by the Environment Agency today (July 22) shows that recovery rates for plastic and glass packaging, were significantly higher than during the first quarter of the year.

This is likely to allay some of the concern expressed in the wake of the release of the Q1 data in April that there may not have been sufficient material available to meet rising recycling targets (see letsrecycle.com story).

For glass, a total of 256,048 tonnes was reprocessed via re-melt applications in Q2, with 147,318 tonnes sent to aggregates. The combined 403,366 tonnes of material processed is significantly higher than Q1, when 326,816 tonnes were recycled.

The higher volume of glass PRNs issued in the second quarter is likely to stem from an increase in reprocessing encouraged by higher PRN prices. Prices rose in the wake of the first quarter data with some schemes concerned that they might not have sufficient glass PRNs to meet their obligations. The price for a glass PRN currently sits at around 65, compared to closer to 50 at the start of the year.

Plastic

An improvement has also been seen in plastics where concerns had been expressed over whether the sector is ready to meet the 37% recycling target, set by the Department for Environment, Food and Rural Affairs (Defra). In total, 165,011 tonnes of the material was processed either in the UK or abroad in 2013 Q2, up from the 150,480 tonnes posted in the previous quarter and close to the level needed for the target to be met.

This comes despite fears that the market would be severely hindered by the Chinese governments Green Fence crackdown on exports of poor quality material, which began in March and is said to have lead to a fall in demand for lower grades of waste plastic (see letsrecycle.com story).

In paper, the volume sent for reprocessing or export remains above the required level needed to meet the overall recycling obligation for the year, with a total of 819,554 tonnes being recycled in Q2 over a target of 624,113 tonnes per quarter. This follows on from a similarly strong performance for the material in Q1.

Meanwhile, reprocessing of steel and aluminium have remained at broadly similar levels when compared to Q1 figures, and have both continued to remain on track to meet their 2013 recycling targets.

Market

Speaking to letsrecycle.com, Ian Andrews, senior market trader at the Environment Exchange, said: What we have here is an excellent set of figures that show that some of the doom and gloom has passed. For 165,000 tonnes of plastics to be traded against the backdrop of things like the green fence and the Jayplas fire that we have seen in recent months is very positive.

We have seen growth in what was expected to be a difficult year. What this might do is create concern among sellers that they may be the last man standing when the market is tight that fear disappears as everyone knows they can hold out for the highest price.

Meanwhile, Mr Andrews said he thought that the increase in recycling seen in the Q2 figures might lead to a balanced market as suppliers see that there is not a lack of material available, but warned that performance could drop if PRN prices start to dip.

He added: There has also been a lot of comment about the high cost that producers are paying but what these figures show is that the market is working correctly and that what the producers are paying into the system is increasing recycling.

If prices start to slip back will we get to a tipping point where the tonnage begins to fall back again and then where does that stop? If plastic crashed to 5 per tonne it might not then act as an incentive for different export routes than to China.

Export

Chris Taylor, PRN trader at recycling and compliance specialist Clarity Environmental, commented that the data lead to questions over the real effect that Green Fence has had on the UK market.

He said: Despite the belief that Chinas Green Fence policy was having a massive impact on the UK plastic export industry, the data has in fact revealed an improvement on the figures from last quarter.

Export is reporting almost exactly the same return as quarter one at around 92,000 tonnes, which leads us to wonder whether export to China is actually as bad as previously thought. Or have new export routes been created? A high PRN price can often cover the costs of setting up new export routes, as we witnessed with glass last year.

There is talk that Indonesia has been ramping up their imports from the UK. UK Reprocessing has also given the plastic market a shot in the arm by increasing their efforts by around 11,000T this quarter.

Mr Taylor added that while the figures appeared to show that plastic and glass are moving in the right direction, work is still needed to ensure that they meet their 2013 recycling targets. Meanwhile, he also commented that the price of steel PRNs is expected to drop as a result of a surplus of material recycled during the first six months of the year.

He said: All in all, plastic is much closer to its targets than was feared, at 49% for 2013. As we approach quarter three, which has historically been strong for plastic, the signs currently point to a tight finish as opposed to the large short-supply predicted throughout the last quarter. As a result, prices are softening.

Glass seems to be in a state of limbo. Glass re- melt has improved by as much as 25,000 tonnes on its quarter one performance and aggregate has improved dramatically compared to quarter one by 45,000 tonnes. But these improvements still leave both glass grades behind target, and so we expect prices to remain strong moving forward.

The price of steel has remained strong throughout quarter two, but the data reveals that it is very much over-supplied, currently by a massive 50,000T, and as a result the prices are softening.

Encouraging

Also commenting on the figures, James Piper, commercial manager for compliance scheme Budget Pack said that they should allay fears over whether targets for materials such as glass and plastic will be achievable.

He said: “It is encouraging to see recycling levels where we need them to be, after early concerns in 2013. These figures are proof that the PRN market can provide a suitable mechanism to increase recycling; when the market price is high, material that was previously uneconomical to reprocess can be reprocessed. As a scheme looking to achieve the best price in the market Budget Pack is always pleased to see healthy figures which should lead to lower costs for producers.”