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Glass market report - 26 April 2013

The first quarter recycling numbers have arrived and are quite a shock. The industry should be used to this by now - what number would not have been shocking to someone?

But this latest set must have been met with a variety of feelings. Some people will regret not already buying more glass PRNs, some will regret selling too many - and some won’t know what I’m talking about and this could be quite serious.

The cost of compliance looks like being even higher than last year and some companies may not have budgeted for this.

So, what is happening? The reason that the glass non-remelt tonnage is so low at 100,000 tonnes is that a £40 PRN is not high enough to cover the purchase price of glass plus crushing, grading, transport and possible gate fee at final destination, not to mention a quite considerable amount of landfill.

Smaller tonnages can be moved locally for a lower cost. But to move the sort of volumes necessary, the PRN value has to be higher or the glass will simply be stockpiled until the PRN value reaches the level required to make the operation feasible.

We should remember that last year, this happened only when the PRN reached £75. For this reason the reported non-remelt tonnage is artificially low. Combine this with some export problems with unprocessed glass and the picture becomes clearer.

Because there is such an obvious shortage of PRNs, it is not so clear why market forces have not already achieved the kind of values necessary to move the market into an oversupply situation.

The answer may be in the number of PRNs issued.

Figures show that, of the 325,000 tonnes of glass PRNs available, only 140,000 have been purchased. This lack of buying interest could cause downward pressure on price to the detriment of availability, making a bad situation worse.

As a reprocessor caught in the middle - between sellers of glass who want the best price for their commodity and obligated companies who view with disbelief an unexpected cost that they do not fully understand and cannot really afford - I predict only more confrontation and rhetoric, especially as they view the recycling industry with suspicion, distrust and increasingly dislike.

There is still probably enough aggregate glass in stockpiles to make sure that the UK gets across the line again this year, as long as reprocessors can see sufficient value in the PRN to make it viable to de-stock.

Remelt may be more difficult but, if the differential system works and the financial incentive is there, we certainly have the capacity to meet this target.

Hopefully, the obligated tonnage for glass when announced will contribute to a more achievable task that will then calm the market. While rumours are rife about how big the drop in obligated tonnage may be, one thing is certain: it will be lower than last year and this can only be good news.

Tim Gent, Director, Recresco

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