Following 2012 being a turbulent year for packaging compliance with shortages in glass predominantly, the 2013 obligation numbers have been awaited with great anticipation. The numbers issued on 15th May 2013 (see letsrecycle.com story) reflected both the UKs producer obligations setting the overall demand for materials requiring to be offset with evidence purchased by schemes and individual producer compliers.
We welcome the publication of the UK obligation, but we believe that there are a number of producers still to be registered and therefore expect it could well increase during the rest of the year. It is critical to know the demand for PRNs in any one material but also as a whole. The key numbers will be glass and plastic as these materials have had the greatest cost impact for producers recently.
Glass
It would appear that glass demand is lower compared to 2012 at 1,584,812 tonnes (split 998,990 re-melt and 585822 aggregate). This is very much in line with our estimates and mainly because of lower sales and light weighting. This will have a stabilising effect for the market but the effect on costs depends greatly on the buying patterns of other schemes and direct registrant companies to keep the steady funding of reprocessors through the year. However, it would appear that there was around 80kT less material going onto the market in 2012. This goes part way to explaining why the glass PRN market was only just in balance in 2012. The next publication of PRN figures in July should give a clear and more accurate split between aggregate and remelt. This will give a greater visibility of activity in the market which should help the sectors understanding better in terms of the challenge ahead.
Plastic
There has been 684,000 tonnes plastic obligation reported in the numbers. Although this is significantly higher than last year because of the increase in target, the increase is not quite as large as was previously expected because the total plastic packaging handled is about 45kT down. The major challenge here will be the restrictions on exports due to the Green Fence project in China but many retailers and others who have access to plastic film will realise that if they do not keep plastic moving, or uprate their material to a higher grade, then they will face a double impact of falling material values and rising plastic evidence costs. The focus for them must be to keep plastic moving to legitimate end markets in other locations. Reprocessors with alternative end markets for bottles and other material in the UK and other EU countries have done a great job in terms of keeping the material flowing and recycling numbers much more in balance than expected. Prices have therefore been better than expected but we should not be complacent.
On first observation the main points of interest in other materials are:
Aluminium
Aluminium has had a strong quarter and this is good news following a weaker performance last quarter. This material is ahead in terms of delivery.
Steel
Steel shows a very strong performance this quarter against a fall in demand reported for 2013 especially in manufacturing.
Paper and Wood
Paper and wood show strong performance against demand even with tonnages reported being lower than the previous four quarters. There are still concerns though with greater tonnages of wood going to biomass and EfW rather than recycling applications as well as issues related to the Green Fence policy in China affecting paper and card exports.
The most interesting observation is that overall the numbers reflect the tough economy that many of our producers and retailers have faced in past years. The total reduction in packaging handled could be reflecting a fall in supplied packed products and manufacturing. This in turn could mean less material being able to be collected and processed for recycling. This factor added to the issue of contamination or lower grade materials being collected for recycling can lead to difficulties in both sourcing and processing quality material for end markets to process and issue evidence- a problem voiced by the glass sector in past years and through other groups such as the Resource Association.
However, this early snapshot of the 2013 market does come with a warning. In previous years these numbers always move later in the year, for example some reprocessors have amended or added tonnage, sometimes within moments of them being published. It is also believed that some producers may still need to register or at least update their data for 2013 as a result of last minute changes. WasteDataFlow numbers will need to be compared to these published figures to try to get some further insights into the market for PRNs in 2013.
Performance
Overall performance has been good in most materials but there are still concerns over glass and plastic. Acting fast to secure plastic film markets and responsible PRN buying strategies should ensure that there is a more stable year in all materials but attention will be required to not allow glass and plastic to tighten due to complacency in not tackling quality issues in plastic and buying across the year in glass.
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