PRN prices look set to remain low this year

The provisional figures from the Environment Agencys National Packaging Waste Database show that 1.79 million tonnes of packaging waste was recycled or recovered in the second quarter of 2011 (March May).

And, while slightly shy of the 1.83 million tonnes reported in the first quarter of the year, this is still comfortably within the averaged out figure of 1.74 million tonnes required per quarter for UK businesses to meet their obligations (see table below).

The figures also show an improvement in performance for aluminium, steel and plastics. For plastics this is significant because there had been indications in the quarter one figures that the market for this year might have been tight (see letsrecycle.com story). This is partly because the material-specific target for plastics and steel were the only ones increased by Defra for 2011, from 29% to 32% and from 69% to 71% respectively.

Conversely, performance in glass, paper and wood in quarter two appears to be slightly down on quarter one. A number of reprocessors are still to report data including UPM Kymmene (UK) Ltd, which also operates a materials recycling facility, glass reprocessors G Obrien and Sons and Glass Recycling (UK) and a large number for steel and aluminium. On the plastics side CK Polymers are among those still to report.

The slightly lower wood figure may have been impacted by a fire in June at the chipboard manufacturer Sonaes plant in Knowsley, which recycles 1,200 tonnes of waste wood a day and is a major producer of PRNs (see letsrecycle.com story).

When the figures are compared to recycling levels achieved in 2010 during the same period, performance overall is slightly down. This is largely due to less strong performance in the case of wood, where 338,681 tonnes was recycled the first half of 2011 compared to 399,511 in the same period the year before (see letsrecycle.com story). However, paper, glass, aluminium and steel all show a year-on-yearimprovement.

Packagingrecycling and recovery carried out in the first half of 2011

Source: letsrecycle.com analysis of figuresfrom the National Packaging Waste Database

Reaction

Early reaction to the figures came from Alan Price, director of procurement at producer compliance scheme Valpak, who said they were encouraging and in line with what Valpak had anticipated.

Mr Price said: The figures are pretty much as expected. I think they mean that the confidence we are seeing from buyers is going to continue. With plastics there was a bit of a rise in prices after the last figures but quarter 2 shows that that is comfortable.

I dont think there will be any change in the prices. I think they will stay pretty firm and steady as they are.

Headded that the performance should create continued confidence and steadiness in the market which he said was important for everyone, including sellers.

A positive analysis also came from Chris Grove, senior advisor for environment and business at the Environment Agency -which publishes the figures.

Mr Grove said that the PRN system was delivering what it is intended to deliver and that if prices were low, that was not necessarily a bad thing.

He said: The whole system is about producer responsibility and achieving obligations. If PRN prices fall because we are in a healthy situation then the system is achieving what it should achieve.

Risk

However, sellers are likely to be more concerned by the data, as it is unlikely to breathe any life into PRN prices, which have been depressed for some time. PRN prices for glass (9/t), aluminium (6-7/tonne) and steel (5-6/tonne) are particularly low at the moment compared to historical levels.

Senior market operator at the Edinburgh-based PRN trading platform, the Environment Exchange (t2e) Ian Andrews, commented: Without any growth in targets next year, these figures firm up the belief that going forward we could see soft prices right through to 2012.

Mr Andrews warned that there was also a risk that if the prices remained low for too long, reprocessors would not bother to become accredited which could push PRN prices up and potentially lead to a peak and trough situation if they decided to re-enter the system.

He said: The risk at the moment is around keeping the sellers in the system and keeping them interested enough to get accredited. That could create a bit of a problem. There has to be some form of value left in the market for people to want to participate.

Mr Andrews said this could be a particular problem in the case of aluminium, where there is a huge disparity between the sale price of the material around 1,000 a tonne and the value of the PRN, which is currently trading at around 6-7 a tonne.

He added:The other aspect regarding aluminium and what might drive some sellers away from the market next year is the introduction of end of waste for metals some people have been saying that it will be hard to tell if PRNs have been claimed against material which they handle.”

Responding to these fears, Mr Grove said that the Agency was not currently concerned about people dropping out of the PRN system.

He said: I think there has been a bit of a drop off between this year and last year but we have seen people coming into the market and dont have any concerns about the number of accreditations compared to last year.