…on how to keep an industry profitable
Packaging recovery notes (PRNs) have long played a disproportionate part in the cash flow and profitability of glass processing businesses. Unlike some recyclates, where the PRN is an administrative burden and the value is largely irrelevant, the glass PRN can represent the entire revenue for glass.
The development of glass into an aggregate substitute was driven almost entirely by PRN price support. Whatever you think of the environmental sustainability of the business model, the financial sustainability has been significantly affected by the recent crash, which demonstrates a failure of the PRN system to genuinely promote recycling or to enforce that the obligated parties should pay for recycling.
During the past three months, the crash in PRN values has led to a huge drop in revenue to the supply chain which has, in turn, caused a significant reduction in the value of container glass cullet. In 2011, those supplying unprocessed kerbside mixed glass for export can expect no revenue. Even the colour-sort plants will pay single-figure sums per tonne and those supplying MRF grades can expect to pay a gate fee for disposal.
The disappearance of price support will make the market more transparent. But it will not encourage recycling nor will it lead to improved collection methods. More likely the opposite will take place.
Where a PFI contract is in place, it may well be too late to change schemes for many years and, in these cases, it may be the collector rather than the council that loses revenue. Where councils have decided to retain single-stream/separate colour stream glass collections, their revenues will be cut almost to zero; their reward for taking the environmentally creditable route lost.
Cullet processors are closer to manufacturing industry than waste recovery. The raw materials they use are of good quality, produced from materials of ever-declining quality, using state-of-the-art equipment. Such technology requires investment and technical support.
“Losing price support will not encourage recycling or lead to improved collection methods”
Although the PRN system administrators imagine that revenues are invested in recycling infrastructure, it is clear to business sector leaders that it is impossible to depend on such a volatile and inconsistent source of revenue to justify capital investment. No board would accept a business plan that relies on a system over which they have no control.
A lack of intervention from Defra and the Government has guaranteed that values of PRNs in 2011 continue to be low. The consultation in May indicated increased obligations over the period to 2020. It is clear that current levels are not substantial and that the tinkering as a result of the consultation is all but worthless.
The 2011 Waste Review has the potential to introduce an improved regime; a two-tier system of aggregate and re-melt PRNs would incentivise the recycling industry to add value to the glass streams.
Sustainable recycling can only be achieved on the back of profitable industry. Industry will only be sustainable on the back of a robust and stable regime under which investment can be made, in the belief that it will be rewarded and supported by appropriate legislation, sensible pricing and joined-up thinking.
Rebecca Cocking is recycling manager at British Glass