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Plastics - 7 September 2012

The market for recovered plastics is fluctuating all the time, with a number of factors affecting the value offered by reprocessors.

Some factors consistently influence the market each month, such as virgin plastic prices, material quality, freight charges and export taxes. But this month has witnessed seasonal factors resulting in lower demand for some plastics and fluctuating prices for both clear PET and natural HDPE.

Following ‘factory fortnight’ - the industry’s two-week summer shutdown in August - stock level restrictions led to a temporary reduction in market demand. As we enter September, reprocessors are generally running at full speed again, encouraging the market for both HDPE and clear PET to start to rise. But a number of other ongoing factors still exist.

Clear PET dropped throughout July and August, by around £40 a tonne in total. But in the past week, the price has started to increase by £10 a tonne on average.

Natural HDPE also fell throughout July, by up to £60 a tonne in some cases. In recent weeks, the price has steadily been increasing again. Mixed bottle and C&I scrap values have remained relatively constant.

One consideration when assessing changes to market values is the packaging recovery note (PRN) value. Based on reported plastic levels so far in 2012, the UK will not be able to meet the 2012 business target of 32%, and an anticipated shortfall in PRNs has increased their value.

If the Q3 data does not show a significant increase, then there is likely to be a PRN shortfall in 2012, which will further drive up their value towards the end of the year. This is important because it is common practice to use the PRN value as price support, and is therefore often considered as part of the value offered to suppliers.

This can have a significant effect on prices offered when PRN values are high.

Recoup believes this is a good approach for plastic bottles, where it will stimulate additional collection, but not for other plastic fractions, where the PRN funds would be better focused on sorting and reprocessing infrastructure. Household pots, tubs and trays are good examples.

The general quality of baled plastic is still in question, with many reprocessors noting a difficulty in obtaining high-quality material which meets their specifications. In reality, an average load and value does not exist, and the market works on a sliding scale of value based largely on the quality and supply requirements.

But a new certification and audit scheme called EuCertPlast has been launched which will mean that plastics of a high quality will be awarded a European CEN standard. Alongside other initiatives, such as the long-awaited MRF code of practice, this certification should enable end markets to confidently purchase plastics.

A longstanding issue facing the recovered plastics market is that of the targets set for plastics packaging recycling. Current legislation is already starting to have an effect on the market for recovered plastics, and this impact will only grow in subsequent years.

The Advisory Committee for Packaging (ACP) recently published its latest annual report, and research undertaken by a plastics sub-group is well worth reading.

The proposed plastic packaging recycling targets for the next five years were compared against current collected tonnage. Using projected figures, the ACP has been able to assess what needs to be changed and also the role of each element of the plastic packaging in the drive to increase collection rates.

Both council services and the public’s participation rates must increase in order to meet these targets. It is important to educate the public about the different types of plastics they are able to place into their recycling unit, encourage consistency with on-pack labelling, and allow consumers to identify how their decisions can affect plastic recycling.

It has been suggested that an awareness campaign is needed for both the public and councils. The challenge will be attracting councils whose contracts are up for renewal to incorporate plastic bottles and other plastic packaging where relevant into their collections.

To avoid further decreases in material quality as collection levels grow, quality-based initiatives also need to be implemented in the next five years. MRFs and PRFs are going to have to increase their capacity and also improve their technical ability to effectively sort the increasing variety of plastic packaging being collected.

It is expected that an additional 6.6 million tonnes of MRF capacity needed within the UK during the next five years is achievable, and will include provision for plastic sorting.

This will allow the UK to reprocess the additional tonnage of plastic while attaining an acceptable quality standard - as long as the new facilities are equipped to effectively sort plastics to reprocessor specifications. This should result in a strong market for recovered plastic in the UK.

Ultimately, the outlook provided by the ACP, along-side the new audit scheme, are positive news.

But the industry needs to address the opportunity to recover extra plastics for recycling and ensure the quality produced is acceptable to reprocessors both in the UK and around the globe.

Stuart Foster, Chief executive, Recoup

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