Real danger glass packaging target will be missed

The price paid for glass PRNs has shot up following the release of packaging recycling data suggesting there is a real danger that this years glass target could be missed.

The provisional data for the second quarter of 2012 reveals a sharp drop in recycling performance for glass, alongside aweak recycling performance for plastics and steel. In fact, the only material to have performed wellin the period is wood.

The data was published on the Environment Agencys National Packaging Waste Database yesterday (July 23).It islikely to change slightly once all reprocessors have reported their figures.

Under the Packaging Regulations, packaging producers have to pay towards the cost of recycling packaging and are set targets each year. They meet these by buying packaging waste recovery notes (PRNs).

The data shows that only around 350,000 tonnes of glass was sent for recycling and recovery in the second quarter of 2012, which is 75,000 tonnes short of what is needed per quarter to meet this years target and almost 90,000 tonnes short of how much was recycled in the same period in 2011 (see table below).

Weak

Following on from a weak performance in the first quarter of the year, this means that the UK will need to boost its performance by an incredible 100,000 tonnes per quarter in the second two quarters of 2012 if it is to meets its target for the year. Even when tonnage carried over from 2011 is taken into account, the performance also falls far short.

Meanwhile for plastics, 135,000 tonnes was recycled during the second quarter. This is an increase of 8,000 tonnes on that achieved in the first quarter but is still 16,000 tonnes short of what is needed each quarter in order to meet this years target. Similarly with steel, 75,000 tonnes was recycled, which is 8,000 tonnes shy of the 88,000 tonnes needed each quarter.

The performance has also impacted on the overall recycling and recovery performance, which fell to 1.7 million tonnes short of the 1.73 million tonnes required per quarter.

PRN prices

As a result, the prices paid for PRNs on the spot market have shot up from 16 to 25 for glass, while for plastics they have moved from 20.50 to 23 and for steel they have climbed from 9 to 12.50.

Thomas Rickerby, senior market operator at the PRN trading platform the Environment Exchange, said: Glass is a big concern. The figure is almost catastrophic and the market is in real danger of not complying this year. This has happened quite suddenly and a lot of the market wont have seen this coming.

Plastic and steel are also not comfortable. We have not seen a situation like this in PRNs for over two years and we are potentially facing an undersupply in three materials. After two years of low PRN prices it is going to be a bitter pill to swallow to see much higher PRN prices for these materials.

Packaging recycling and recovery in the first two quarters of 2012

Source: letsrecycle.com analysis of datafrom the National Packaging Waste database

Glass

The fall in the glass recycling tonnage has been put down to a tightening up by the Agency on the issuing of PRNs as well as the exit of a large glass reprocessor, Moss Construction Aggregates, from the PRN market. The Yorkshire company issued PRNs against glass which it recycled into aggregates but this accreditation was cancelled earlier this year.

Another large glass reprocessor, Nationwide Recycling, based near Swansea, also exited the market when it was placed in liquidation last year (see letsrecycle.com story). And, more widely, cuts in spending on new infrastructure are thought to have reduced demand for recycled aggregates for use in construction projects such as roads.

Olympics

Others have put the fall in glass recycling down to the poor weather at the start of this year, and indicated that the situation may improveafter the forthcoming Olympics, when a rise is expectedinglass bottle arisings.

Chris Taylor, trader at PRN trading specialist Clarity Environmental, said: The poor summer weather we experienced at the start of the season could go some way to explain these low volumes and perhaps that glass produced from Euro 2012 has not yet been reprocessed. Once these figures come through, its likely to make up some of the deficit and with the Olympics starting next week, we should start seeing larger volumes.

One glass reprocessor told letsrecycle.com that the figures suggested that not as much glass was being recycled in the UK as previously thought. And, he indicated that it could threaten the UKs compliance with the Packaging Waste Directive. The UK achieved compliance with the targets in 2008 and they have not been raised since then, but he suggested the UK could even fall below the recycling level achieved then.

He said: It could mean we dont make our European obligations now. This would be quite serious.

However, he said it could still be possible to meet the targets as it is still quite early in the year and higher PRN prices could incentivise local authorities and reprocessors to divert more glass from landfill.

He said: There are councils out there who are pulling bottle banks because they cant afford to have them emptied but, if the value rises, the PRNs should cover that.

There is also some glass that is really badly contaminated which goes to landfill. The PRNs should now be high enough that it is worth the costs of cleaning it.

Plastic

While performance in plastics in the second quarter of 2012 was better than in the first quarter, it will still need to improve if the targets for 2012 are to be met and will need to have to increase substantially to meet next years higher target. The poor performance has been put down to the weakening export market for plastics and a slowdown in China.

One thing which could come to the rescue, however, are changes made by the Environment Agency earlier this year to the point at which plastics reprocessors can issue PRNs for high grades of PET flakes. Previously these flakes had to be melted before PRNs could be issued but now they can be issued if they are properly segregated and washed. The flake used to be sold to the moulding industry who did not always issue PRNs and it is thought by allowing reprocessors to issue them earlier in the supply chain, more will become available.

Mr Rickerby said: This could turn the plastic market on its head and we could see a whole raft of PRNs coming on the market.

A note of optimism about the packaging figures was also sounded by Steve Gough, chief executive of packaging producer scheme Valpak. When the figures for the first quarter of 2012 were released showing a fall in plastics recycling tonnage, the company had predicted some bounce back.

He said: Obviously data from some reprocessors and exporters is still to come but Im very pleased to see that the recovery in plastic that we are seeing is starting to show in the Q2 data. In addition we have seen significant increases in tonnage above the initial cut of the Q1 data (circa 10,000t for plastic alone) and we anticipate similar corrections in Q2.

Overall

Looking at the numbers overall, Mr Gough said that Valpak was not particularly surprised by the data. He said: We look forward to the remaining reprocessor data to arrive but on balance, especially when adding the transitional tonnage from 2011, the numbers are approximately in line with what we expected.

However, others are more concerned about the future outlook. One important question is whether the poor performance in glass, steel and plastics may put pressure on the general recycling target, making this hard to meet.

Mr Rickerby said: The market is looking worrying. I think some people in glass may ask the question whether there is any point spending money on compliance if they cant comply the figures are that bad.