China’s economic problems and a further fall in the price of oil are causing tightening in the UK plastic PRN market, with the latest price hitting £35 per tonne, up £5 on a week earlier.
In its latest monthly report on the PRN market, the Edinburgh-based The Environment Exchange (T2e) said: “Concerns continued to be voiced regarding China’s appetite for UK recovered materials given their current economic position and effect the falling oil price is having on the recovered material sector.”
Ian Andrews, senior market operator at T2e, said plastics PRNs were currently harder to source, although some of the scarcity was being driven by “scare stories” of the likely impact of these factors.
“With such strong demand in the market and buyers actively looking for tonnages, some have stated they believe sellers are holding on to volumes due to the rising prices,” he said.
Andrews told MRW that a reticence to buy PRNs at this time of year was typical, with those needing to purchase, usually through a compliance scheme, banking on a price fall in the final months.
However, the slowing of China’s economy and global oil prices down to 2009 levels mean that demand for secondary plastic is weaker so PRN prices could rise yet further.
Andrews said an added complication was that more compliance schemes are now in the market, with some offering fixed-price contracts to packaging producers. He said these could be at agreed rates of £15-£20 which would mean a considerable loss if the PRN price remains as high as £35 during 2015.
Andrews also pointed out that, in December 2014, the latest Plastic Packaging Market Study, known as Plastic Flow, had concluded that the recycling performance of the UK was a higher percentage than previously reported.
He said it was possible, therefore, that planned uplifts of 5% in the UK plastics targets for 2016 and 2017 may be revised down by Defra, which would affect PRNs into next year, easing the pressure on buyers.
As MRW has already reported, there is concern about an inability to hit the aluminium target for 2015. Its PRN is currently £35-£40.