Pressure grows for Defra to reassess steel PRNs market

At worst, businesses could be faced with buying PRNs at very high prices. Worst hit would be packaging makers, the larger retailers and steelmaker Corus, all of whom need substantial numbers to meet their obligations.

Recent months have seen concerns expressed by some businesses that they are facing an unnecessary financial burden in the form of environmental costs during a recession. Packaging waste costs have been included in these concerns and last week the regulatory burden also featured at a Conservative Party conference with businesses in London.

So far, it is thought that the government, in the form of the Department of Environment, Food and Rural Affairs, has not agreed to any change in policy despite concerns expressed to it by the packaging sector. Difficulty in changing regulations or the impact this might have on businesses who have already bought steel PRNs have been seen as reasons for not making any changes.

The decisions not to change targets or bring in mitigation measures are likely to have been taken by former recycling minister Jane Kennedy who has recently been replaced by Dan Norris. It is unclear as yet what Mr Norris's view on the packaging waste situation will be. However, he is likely to take a close interest in the meeting this week of the Advisory Committee on Packaging, chaired by John Turner.

And, Defra will be issuing its second quarter figures for 2009 on July 22 and Mr Norris could comment on the data. It is likely that the figures will show the UK is significantly short of its usual half way achievements for the year – the UK has to recycle 365,000 tonnes of steel by the end of 2009. But, world steelmaking is down 50% this year and Corus has taken little packaging scrap in this year in the UK.

John Turner, chairman of the government's Advisory Committee on Packaging, told letsrecycle.com that with regards to meeting steel PRN targets, “it is going to be a tight year. We have been having discussions with government on a number of possible ways of dealing with it and they are still considering them. My advice would be not to leave buying PRNs to the last minute.”

The ACP has a metals task force and Mr Turner said that this had made recommendations “which government is considering but there is not a lot more we can do without changing the system completely. We will be discussing them on Wednesday. But it is a matter or managing this year and we are hoping for an upturn in the market.”

Mr Turner said that the situation was particularly difficult because Corus had stopped taking material and overseas demand had also dropped. “We will be looking at the latest National Packaging Waste Database Quarter 2 packaging figures on Wednesday to assess the latest situation.” However, he added that all targets except steel looked relatively “comfortable” for 2009.

Corus

Steelmaker Corus has been in the news over the past few days because of concerns among the 3,000 strong workforce that contract losses could jeopardise the future of its Teesside mill, one of four plants in the UK that uses packaging scrap. The latest developments are thought to involve talks continuing with some of the members of the contract group and there remains hope that the plant will be saved.

In the meantime Corus's CanRoute work has been put on hold. This is the publicity and grant scheme which is used to develop can recycling, particularly from local authorities.

David Williams, manager of the Corus steel packaging recycling, told letsrecycle.com today that the company had bought a few thousand tonnes of steel packaging scrap for the Aldwarke electric arc furnace in Rotherham in July and this was likely to continue into August.

Corus could also buy some packaging scrap for Teesside and Scunthorpe soon. It is thought that the company has started to use up some of its steel scrap stocks but it is also aware that there is a shortage of steel PRNs and by using packaging scrap it can generate more. This will be driven in part by a need to service its own obligation which is considerable.

Scrap 

The question remains as to whether the use of packaging by Corus will generate enough PRNs for it to have some to sell to others who need them. Much will depend on whether the Port Talbot furnace starts to take in packaging scrap and this might happen although no decisions are yet thought to have been taken.

CanRoute itself is currently under review. Mr Williams told letsrecycle.com: “We are looking to reshape CanRoute and hope to be making an announcement early in September.”

Current prices for steel packaging PRNs are in the order of £75-80 but could rise to as much as £100 if the second quarter figures show a significant shortfall. Accordingly the level of involvement of Corus in the marketplace will be a significant factor.

Metal recycling businesses are thought to be keen to point out that they are not making substantial profits from the higher PRNs which they can issue for export tonnages. The main grades, 1 and 2, contain only a very small proportion of packaging and the sector notes that for years the value of steel PRNs has been very low.

And, the sector also points out that it has to produce business plans to show how it is using the PRN income which can be spent on price support, promoting packaging recycling and equipment. However, one compliance scheme told letsrecycle.com that they expected the profit line of metal recyclers who export to benefit from the higher PRN value.