Supply data for the first quarter of 2018 shows the worst packaging recovery note (PRN) generation since Q3 2015, according to Tom Rickerby, head of trading at The Environment Exchange (t2e).
He added that there was also quantitative evidence of the impact of China’s import restrictions on recovered paper and plastic, as well as signs of a wider stagnation in recycling rates.
Paper recorded its worst PRN return since Q3 2012, according to t2e. Firm evidence of a contraction in the paper market has pushed prices higher on t2e, with the spot market up an additional 50% to £6 per tonne since the release.
q1 prn figures
Ian Andrews, director at PRN Trader, said the standout data from the quarterly data was in paper, where the figure for the quarter was behind estimated demand.
“Although not disastrous, due to the healthy carry-in figure, it is certainly concerning to see this market so far behind at this stage given most producers expect this market to fill general recycling obligations this year,” he said.
He added that that general recycling obligations could be affected.
“Traditionally, this obligation has been filled by the paper and wood markets. But with the total wood supply required to meet its material-specific demand this year, little will be available for this obligation.”
Andrews also noted that demand for paper tonnage last week had resulted in prices increases: “The influx of independent buyers, competing with larger demand from compliance scheme Q2 purchasing requirements, has created the upward pressure with supply weak at this stage of the year.
“The recent announcement of a complete ban on materials being exported from the US to China may provide some hope that UK export volumes will increase in the coming four weeks and supply will increase.”
Combined glass generation is slightly up on the same period last year but is likely to fall short of projected demand this year, Rickerby said.
Andrews said there was still work to be done with growth of 40KT next quarter needed if prices were to remain at current levels.
“One would expect to see some upward pressure on prices this quarter with the note values aligning due to the aggregate undersupply position,” he said.
Andrews said that the target increase for wood this year had already resulted in prices opening at record levels, with buyers trying to secure tonnage early, and the latest figures showed an undersupply in the market.
According to t2e, wood prices jumped 40% to a year high of £25 on the back of weak Q1 data. “Wood PRN prices are now entering unchartered territory, and nervous buyers will hope that higher PRN values can help stimulate growth in a market emerging from a challenging winter period and facing fierce competition from the biomass sector,” said Rickerby.
t2e said that plastic PRN prices had opened the year at record levels in a potential slowdown in PRN generation following the Chinese import ban. However, market response on t2e to the new data has been muted, as the Q1 figure was seen as reasonable in the context of the ban.
Andrews said that a healthy carry-in figure for plastic should ensure settled prices this quarter.
Rickerby added: “Despite the current challenges and calls for producer responsibility reform, advocates of the current PRN system will be pleased to see the market responding well to support and stimulate the underperforming recycling markets.”