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Plastic market report - June 2012

The markets, and end market options are driven by a number of parameters including material availability and quality, transport costs, exchange rates and taxes.  The UK markets are generally good for the higher quality plastic bottles and C&I films. Increasing costs of export containers in 2012 and wavering demand for some grades in China has weakened export markets.

  • HDPE Bottles: Throughout April, we saw the market for HDPE dropping by around £40p/tonne or more. With many traders not able to sell their material onto export, it has caused an increase of sales to UK reprocessors and a backlog of material to build up the UK, which resulted in reduced demand and lowering of value.
  • Mixed Bottles: The price of mixed bottles has not changed significantly over recent weeks. The drop was between £20p/t- £40p/t which hasn’t affected the market significantly
  • Clear PET:  Clear PET has also dropped quite dramatically, by up to £50p/t in some cases.

Some weakening market values will be a result of lowering quality. Alongside reprocessors and trade associations, MRF operators have recently stated that the public need to be better educated on the types of plastic which can be recycled. They have expressed concern over the amount of mixed plastics, including black trays that come into MRFs, affecting both the material quality and the capacity at which a MRF is able to run. There is to be a MRF code of practice - mandatory or otherwise - that may help to address some of the perceived quality problems that currently exist.

Markets for collected plastics are generally more reliable and stronger than they have ever been. Putting monthly or even yearly fluctuations to one side, it is easy to overlook that the plastic bottle collection schemes of the 1990s struggled to find reliable markets, and were required to pay a gate fee in some cases to get the material recycled.

As household collections began to increase, some leading UK and EU reprocessors together with a strong export market allowed the increased tonnages to be recycled. From here, more UK infrastructure could be justified with significant facilities coming online from 2005 onwards to process more material, including major developments in PET and HDPE bottle food grade reprocessing.

Whilst selling to the highest bidder can be attractive, and sometimes necessary to support collection costs, the over reliance on uncontrolled export markets can have its dangers as demonstrated in late 2008 when the Chinese markets were severely restricted, and the UK struggled to cope not just with the quantity of material still being collected, but moreover the quality. However, this situation only lasted a number of weeks which did not impact on collectors, sorters or traders enough to alter their approach.

There is an expectation that the amount of bottles exported is reducing in recent years as UK reprocessors compete. However, the common practice of mixing bottles and non bottle rigids items such as pots, tubs and trays produces a lower quality output which can attract competitive prices from non EU markets where cheap manual sorting is used to separate out the fractions prior to reprocessing. This has led to some investments in secondary sorting facilities focussed on plastics, called PRF’s.

There has been a significant increase in the tonnage of domestic plastic packaging contributing to the total UK plastic packaging recycling levels in recent years and this trend is expected to continue.

For any plastic collection scheme a key requirement is the availability of end markets and a clear understanding of the quality standards or specifications for entry to those end markets. As a rule the higher the quality standard of the material collected and sorted the higher the sales value that will be achieved, and the wider the choice of end markets. It is important to ensure a rational and practical approach, collecting only materials which can be sorted and which can achieve sustainable end market outlets.

Recoup first issued a bottle recycling guidance document in 1995, and a similar guide for pots, tubs and trays in 2007. These are now updated and combined in a single reference document which is freely available from the Recoup website

Future Market Considerations

There is an expectation that the UK will meet its 2012 quota for plastic packaging recycling. The targets for 2012 mirror 2011, and it is known that household plastic collections are increasing with new collections systems coming online. The reduced recycling levels reported in official Q1 2012 figures are not thought to be significant at this stage. With many leading traders and reprocessors operating a large site or sites with significant storage areas, the quarterly reporting does not always reflect the amount of material sorted, baled and awaiting reprocessing or shipment to a third party reprocessor. However, there will be some requirement on the export market option to allow some the 600kt + of plastic packaging to be recycled in 2012, particularly for the non bottle fractions.

The PRN system itself has been under the microscope and commented on by many within the sector in response to various recent consultations and discussions. One of the key discussions is whether to refine the plastic PRN system to allow the funding to be targeted in the right areas. This has included a split between domestic and commercial plastic packaging, by format, or even by end market.

The BPF recycling group have issued a document to propose such an amendment. They rightly identify a need to address the current situation whereby a UK reprocessor has to apply several treatment steps and convert the plastic to a pellet or flake before issuing a recycling note, where as a trader can simply bale up plastic, place it in a container, load it onto a ship, and raise a recycling note for the same value.

The BPFRG suggest using a mechanism of differential targets to create an even playing field, where obligated businesses, through their Compliance schemes, would be required to obtain an increasing percentage of their evidence from UK reprocessed tonnage and a decreasing percentage of evidence from unprocessed export.

Such differential targets for plastic would allow UK reprocessors to spend more of their PRN revenue on sorting and processing equipment without the risk of losing their feedstock sources to their export competitor. In addition the clarity of such a policy would lead to greater confidence to invest in the UK recycling sector which, as it increases supply side capacity, would in turn lead to lower PRN values

Longer term, a greater challenge is expected to meet the new plastic packaging targets as we move towards 2017. Bottle collection growth must be achieved through increasing existing performance as collection infrastructure already widely exists, the infrastructure for handling, sorting and reprocessing non bottle rigid items must be vastly improved, and the opportunity to recycle domestic films and the tonnage potential to 2017 must be better understood. Alongside this, current C&I recycling levels will also need to grow significantly. The clock is ticking!

Something that may not be fully appreciated is the potential long term impact of upcoming EU legislation. This includes possible revisions to packaging targets, although these are not expected to exceed the targets already set by DEFRA for plastic packaging. The separate collection of 50% of plastics (from residual waste) from 2015 is not restricted to packaging which may have implications for the current set up of collection and handling systems. The point where waste plastic becomes a product, and therefore is no longer bound by waste legislation, is also currently being debated.

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