Glass manufacturers are hopeful that the new 75% glass recycling target will decrease the cost of compliance, but experts have expressed caution on the likelihood of a sudden drop in PRN prices.
Defra has recently announced the packaging recycling target has been lowered from 81% to 75%, with an incremental rise to 77% in 2017. The split between applications has also amended, with remelt increased to 65% in 2014 and to 67% in 2017 from the current 63%.
The British Glass Manufacturers’ Confederation said it was pleased the Government had taken on board their recommendation of reducing the target, as it will contribute in bringing down “unjustified” PRN prices.
It estimated they could drop to a “more sensible level” of £30 per tonne. Last year, the price of the remelt notes had reached £85 per tonne.
“The lower price will in turn decrease the price of recycled glass and the glass manufacturing industry will be able to increase the amount of recycled glass it uses,” said the association.
According to an impact statement produced by Defra (file right), obligated producers are expected to save as much as £106.9m in compliance costs in the next four years as a result of the amended targets.
The Wine and Spirit Trade Association (WSTA), which had also lobbied for the reduction, estimated its members could save up to £38m.
WSTA chief executive Miles Beale said: “Since mid-2012 there has been a huge increase in PRN prices, which has had a significant commercial impact on our members. We hope that by lowering the PRN rates and targets this will restore stability to the market.”
However, Phil Conran, director at consultancy 360 Environmental, on his blog expressed caution on whether the target reduction will necessary lead to a sharp decline in PRN prices.
He calculated that demand for glass PRNs should reduce by at least 120,000 tonnes.
“That should see a significant weakening of the glass PRN price. The question is whether some of the bigger glass PRN suppliers will see it that way or whether they will use their market share position to keep prices high,” he said.
Chris Taylor, PRN trader at Clarity Environmental, also said the new target of 75% would be low enough to push PRN prices down, but added:
“We will, of course, have to wait and see how this pans out over the course of the year. It will certainly create an interesting trading environment in the short term, as buyers and suppliers of PRNs try to find a pricing level that both are happy, or at least content, with.”
The new targets will come into force as the packaging regulations are amended, which Defra expects to happen in Autumn 2014. However, the Environment Agency has confirmed obligated producers will only be required to meet the new 75% target for the 2014 reporting year.