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MARKETS - Packaging: 30 November 2013

As the dark nights of winter close in, the release of the Q3 supply figures provided some comfort with plastic reporting excellent growth and creating a surplus supply for the first time this year. Glass again underwhelmed with figures which if viewed in the context of the quarter looked very promising but compared against in year demand still look some way off.  All other materials look very comfortable with prices across all markets softening to reflect the position.

Plastic

Following on from the strong performance in Q2, plastic has reported a surplus for the first time this year with volumes recorded at 195,000 tonnes for the quarter, up 19% from Q2 (165,510 tonnes) and up 25% on Q1 (157,146 tonnes). With a quarterly demand figure of 175,000 tonnes this increase in volume gives the clearest evidence yet that the PRN system is working. The high values traded over the period in question have incentivised the collectors to secure more material and feed it into the system all as a result of a strong PRN price.

In the week leading up to the Q3 supply figure release, market prices started to soften in anticipation of a strong return. Sellers, who were being released from bi-lateral agreements, returned to the market along with newly accredited businesses that had previously not been able to register for economic reasons and upon entry decided to sell against the best buy prices available.

Once the numbers were released and the true picture was provided it resulted in a procession of sellers coming to the market and releasing tonnage against pre-existing bids which caused a further softening of the price. The prices very quickly fell from £65 down to £35 in the space of a couple of weeks with buyers now aware of the price slide feeding bids into the market at below last traded levels. While it is comforting to see the system working it would be foolish not to point out that if the prices were to continue softening it would eventually lead to the point where it became uneconomic to process the material and the high values would eventually return.

Buyers should take note that any devaluing of the prn/pern note in the fourth quarter could have serious consequences for Q1 supply in 2014, at a point were the demand of the market will be approximately 195,000 tonnes per quarter because of next year’s 5% target increase.

Glass

The glass market, on the face of it, continues to be undersupplied this year. As mentioned earlier, if the supply figures were compared against the quarterly demand, buyers may feel comforted but given that the glass market has been carrying a deficit from the first quarter the numbers still do not stack up. The Glass Other market has been carrying a shortfall of 50,000 tonnes since Q1 and, although quarterly supply has become more balanced in Q2 & Q3, no additional tonnage has been created to alleviate the pressure. In Glass Remelt the situation looks more positive with this market actually showing a reasonable performance for the year.

Even in the face of a strong position, the remelt market continues to see price increases due to the fact that it remains the option note whereby if Glass Other supply fails to meet its demand it should ride to the rescue. Where glass prices will end up this year is anyone’s guess.Without any supply information being released from the regulator until 31 March 2014, the market will have no indication other than trading prices to judge whether we will make it over the line or not.

We can only hope that the sellers in the market can pull another rabbit out of the hat as they did last year to get all demand satisfied. It should be pointed out that last year’s strong Q4 performance will have invariably have sown the seeds to the current Glass Other undersupply in Q1. 2014 will be an interesting year for glass with the upcoming consultation on targets to be debated.

Ian Andrews, senior market operator, The Environment Exchange (t2e.co.uk)

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