The market for packaging waste recovery notes (PRNs) has not yet fully “woken up” yet this year, with certain materials very hard to get hold of as reprocessors wait to see which way the market will turn.
The general view of sector analysts is that although the market is not likely to see an oversupply like that seen in 2003, this year’s tougher recovery targets will be reached.
But some are suggesting that the real challenge this year will be procuring the right kind of PRNs. Experts told letsrecycle.com that there would need to be a “rearranging” of PRNs between compliance schemes with existing long-term contracts with reprocessors.
Glass, steel and aluminium are thought to be key areas where procurement could be difficult this year. One trader was concerned that some schemes with long-term contracts in place could use “difficult” material PRNs for their general recycling quota. This would mean they would be unavailable for other obligated parties to use for material-specific obligations.
“That is the great fear of many schemes,” said one smaller compliance scheme. “Why should the larger schemes worry? They have their contracts in place.”
Rise
The industry is waiting with bated breath for the official DEFRA figures for the whole of last year, with hopes that they will be published in April. Trading should pick up by that month, with some predicting that while a slight rise in most materials is likely over the coming weeks, materials like glass and aluminium could rise through the 30 mark later in the year.
Expectations are that the kind of price collapse seen in December 2003 is unlikely to happen again this year, and those buying PRNs would be “unwise” to wait until December to purchase their obligations.
One analyst told letsrecycle.com: “There won't be a collapse (in prices) in December, people will carry over PRNs into next year to use them against next year's targets. There could be a rude awakening for some people if they are waiting for the kind of price collapse that happened last year.”
Compliance scheme experts suggested that there was no point holding on in the hope of a price collapse, predicting that prices would rise a little throughout the year.
“There are always going to be opportunists out there, but I think people would be unwise to wait for the end of the year – it's a big risk,” one compliance scheme manager said. “If you are a reprocessor, faced with tonnage that might go cheap in December, you'll just hold it and take it over to next year. The trouble this year was that there was too much around. But it would be dangerous to assume that will happen again.”
Larger compliance schemes have operational plans approved by the Environment Agency laying out how they are to buy throughout the year. Valpak, the UK’s largest compliance scheme, warned that holding on to buy PRNs was “unrealistic”.
Steve Gough, Valpak’s chief executive, said: “We believe it is unrealistic to postpone procurement until the end of the year in the hope that prices come down. Any scheme relying on this risks non-compliance and potentially high prices for its members.”
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